Ofgem has confirmed that the energy price cap will rise once again in the New Year in a devastating cost of living blow for consumers.
The typical energy bill for households on a variable rate tariff will increase to £1,738 a year between January and March 2025.
This represents an increase of £21 or 1.2 per cent from the cap currently set by the UK’ energy regulator. As such, households will pay £1.25 more a month. Earlier this year, Ofgem’s energy price cap plummeted to £1,568 earlier this year in a welcome sign for households struggling to keep up with the cost of living crisis.
However, the cap went up by 10 per cent on October 1 to its current level of £1,717 per year with this trend looking set to continue for the foreseeable future.
Despite this most recent hike to Ofgem’s cap, it remains 10 per cent, or £190 cheaper, compared to January to March 2024, and 57.2 per cent than the £2,321 posted for January to March 2023.
Over the last couple of years, households have been forced to contend with soaring energy prices which have resulted from wholesale pressures on the gas and electricity market and the fallout of Russia’s illegal invasion of Ukraine.
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Ofgem’s price cap rise means people will pay towards their energy bills
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Tim Jarvis, the director general of markets at Ofgem, said: “While today’s change means the cap has remained relatively stable, we understand that the cost of energy remains a challenge for too many households.
“However, with more tariffs coming into the market, there are ways for customers to bring their bill down so please shop around and look at all the options. Our reliance on volatile international markets – which are affected by factors such as events in Russia and the Middle East – means the cost of energy will continue to fluctuate.
“So it’s more important than ever to stay focused on building a renewable, home-grown energy system to bring costs down and give households stability.”
Campaigners are urging the Government to do more to tackle fuel poverty as families continue to face energy bills “50 per cent higher than pre-crisis levels”. Fuel poverty is the term used to describe when people are unable to adequately heat their home without using a larger portion of their disposable income.
These calls to action come following the Chancellor’s decision to means-test Winter Fuel Payments, a previously universal benefit for pensioners. Now, older Britons need to be in receipt of Pension Credit and other benefits to access the up to £300 in energy bill support.
Adam Scorer, National Energy Action’s chief executive, broke down what is at stake for Britons following today’s latest announcement from Ofgem.
He explained: “Today’s news that the price cap is rising by 1% will impact millions of vulnerable households. Bills are around 50 per cent higher than pre crisis levels. With temperatures now plunging and far less support available many are getting deeper into debt trying to keep warm.
“Now we know there will be no let up into January and beyond. Targeted government support is essential to save millions from the misery and danger of a cold home.
Simon Francis, the coordinator of the End Fuel Poverty Coalition, added: “As the temperatures plummet, a fourth winter of the energy bills crisis looms large in people’s minds.
“The decision to introduce a price cap change in the middle of winter was taken by Ofgem in 2022 and was described as an inhumane policy at the time. No wonder it has been opposed by campaigners ever since as households will have to find more money to keep themselves warm at the worst possible time.
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“Already the average household will have paid around £2,500 extra for their energy than had we not been so exposed to volatile energy markets. To make matters worse, the new Government has cut back the levels of support available to some of the most at risk households.”
Following its latest price cap update, Ofgem is urging consumers to reflect the way in which they pay their energy bills. Some five million customers pay by standard credit payments which means any gad and electricity that is used is paid for after.
However, the regulator is sounding the alarm that this is a more expensive way to pay energy bills in the winter months with their being cheaper alternatives for customers to consider.
According to Ofgem, families will save £100 by switching from standard credit payments to Direct Debit payments or smart pre-payment meter.