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Household energy bills in Britain will rise again in January after regulator Ofgem said it would lift the price cap by 1.2 per cent following an increase in wholesale costs.
The regulator on Friday set the energy price cap for the period between January and March at a level that will mean a typical household pays £1,738 a year, compared with £1,717 now.
The move follows a bigger 10 per cent increase in the cap that took effect in October. Bills for about 26mn households remain hundreds of pounds higher than before the energy crisis, which was worsened by Russia’s full-scale invasion of Ukraine in 2022.
The price cap, introduced in 2019, sets a limit on how much energy companies can charge homes on default tariffs per unit of gas and electricity consumed. It is reset every three months to reflect changes in wholesale prices.
The higher cap underlines the difficulties facing the Labour government, which attacked the previous Conservative administration over the cost of living crisis and has pledged to reduce energy bills.
Gas heats the vast majority of Britain’s homes and is used to make more than one-third of its electricity, meaning any increase in wholesale gas prices has an impact.
While typical bills have fallen from the peak of £4,059 hit early last year, the debts households owe energy companies reached a record £3.7bn at the end of the second quarter, according to Ofgem.
Tim Jarvis, director-general of markets at Ofgem, said on Friday that energy bills “remain a challenge for too many households” and urged customers to shop around for better deals.
Ofgem said cheaper deals were returning to the market, noting that eight on the market were “at least 10 per cent” below the price cap level.
Wholesale gas prices remain high because of a combination of geopolitical tensions and disruption to supplies from gasfields.
On Wednesday, UK energy suppliers pledged extra support of about £500mn for households struggling with bills. Several industry executives and campaigners have argued for a so-called social tariff which would see low-income households pay less for their energy.
Ed Miliband, energy secretary, said the price cap rise would “cause concern” for families and the government “will do all we can to help people”.
He highlighted help available for vulnerable homes, such as the Warm Home Discount, and said the government’s plans to move towards more renewable energy was “the only way to take back control of our energy”.
However, the government has been heavily criticised for cutting winter fuel payments for pensioners. A Whitehall impact assessment this week showed the move will push up to 100,000 pensioners into poverty per year.
Ed Davey, leader of the Liberal Democrats, urged the government to freeze energy bills and reinstate winter fuel payments. “Enough is enough,” he said.
On a per unit basis the cap will rise from 24.50 pence per kilowatt hour to 24.86 pence per kWh hour for electricity, with a daily standing charge of 60.97 pence, down from 60.99 pence now.
For gas, the cap will increase from 6.24 pence per kWh to 6.34 pence per kWh, with a daily standing charge of 31.65 pence, down from 31.66 pence.