Energy price cap to increase by £149

Energy regulator Ofgem has announced that, from the 1st October 2024, the price cap will increase by £149 to £1,717, an increase of 10% from the previous price cap which was £1,568.

The price cap which sets a maximum rate per unit and standing charge that can be billed to customers for their energy use, will rise by 10% on the previous quarter from 1st October to 31st December 2024. For an average household paying by direct debit for dual fuel this equates to £1,717 per year, adding around £12 a month to an average bill.

While this is an increase on the previous quarter, the new cap is 6% (£117) cheaper compared to the same period last year (£1,834) and 49% (£1,654) less than 2022 (£3,371) during the energy crisis, which saw the introduction of the Energy Price Guarantee.

Rising prices on the international energy market – due to increasing geopolitical tensions and extreme weather events driving competition for gas – are the primary cause of the rise, accounting for 82% of the increase. Ofgem recognises that any increase will put additional pressure on households and continues to work with the new Government to explore options to support customers that need the most help, as part of an ongoing review of energy affordability.

Ofgem has today also published a paper on options to reduce domestic standing charges and increase the choices available to consumers. Standing charges are the fixed costs on bills that cover getting energy to people’s homes. Options in the short term include diversifying the range of tariffs to give customers more choice on standing charges and moving some of these up-front costs to the unit rate (the price charged for every unit of energy used), and in the long term, reviewing the allocation of network costs.

The options paper follows Ofgem’s call for input on standing charges and highlights choices and trade-offs if changes are implemented that could disproportionately affect low income and customers who are unable to reduce their energy use safely.

The regulator is also reminding customers who are concerned about their bills to contact their supplier and check they are accessing all the support they are eligible for. This follows a campaign launched by the Department for Work and Pensions earlier this week, encouraging the 880,000 households eligible for pension credit to claim it, and other support such as Winter Fuel Payment.

Jonathan Brearley, CEO of Ofgem, said “We know that this rise in the price cap is going to be extremely difficult for many households. Anyone who is struggling to pay their bill should make sure they have access to all the benefits they are entitled to, particularly pension credit, and contact their energy company for further help and support.

“I’d also encourage people to shop around and consider fixing if there is a tariff that’s right for you – there are options available that could save you money, while also offering the security of a rate that won’t change for a fixed period.

“We are working with Government, suppliers, charities and consumer groups to do everything we can to support customers, including longer term standing charge reform, and steps to tackle debt and affordability.

“Options such as changing how standing charges are paid and getting suppliers to offer more tariff choices and give customers more control are all on the table, but there are no silver bullets. Any change could leave some low-income households worse off, so it’s important we hear views on our proposals and continue working with the Government to see what targeted support could help customers.

“Ultimately the price rise we are announcing today is driven by our reliance on a volatile global gas market that is too easily influenced by unforeseen international events and the actions of aggressive states. Building a homegrown renewable energy system is the key to lowering bills and creating a sustainable and secure market that works for customers.”

Richard Lane, Chief Client Officer at StepChange Debt Charity, said “While some households may not have felt the squeeze quite as much in recent months due to the warmer summer weather and a slight fall in the cost of energy, for many – particularly those on the lowest incomes – affording energy bills each month remains uncertain.

“For our clients struggling with energy arrears, levels of debt have risen over the past year regardless of the price cap being lower than it was in 2022/2023. With other essential costs such as housing putting long-standing pressure on people’s budgets, it’s a worry that a rise in the price cap may tip struggling households into deeper debt.

“To overcome this cycle of financial hardship and allow households some protection from the fluctuation in the cost of energy, the new Government must urgently introduce targeted support for those struggling, while addressing the £3bn worth of energy debt that has built up. Too many households are facing fragile budgets, in which even slight rises in the cost of utilities will push them into the red.”

Steve Vaid, Chief Executive at the Money Advice Trust, the charity that runs National Debtline, said “Rising energy prices come at a difficult time for people who are already struggling with their bills, as winter hits and energy usage goes up.With energy arrears already at record levels, the Government must act to provide support to households in difficulty.  

“The Help to Repay scheme we have proposed, which would provide repayment matching and debt write off options, is urgently needed and could help hundreds of thousands of households currently trapped with unmanageable energy arrears.”  

Joanna Elson CBE, Chief Executive at Independent Age said “Today’s price cap announcement shows that the drop in prices earlier in the year was only a brief moment of respite, and energy prices will rise yet again by 10%, from an average of £1,568 per year to £1,717. As the weather starts to turn colder, older people in financial hardship up and down the country are worried about their budgets. Many are on a low fixed income, and they will now need to find more money to cover their rising energy bills.  

“To make matters worse for older people in poverty, this bill increase coincides with the ending of the Winter Fuel Payment for people not receiving Pension Credit. There could be up to 1.2 million older people eligible for Pension Credit who don’t receive it. On top of that, many are just above the eligibility threshold but still live on a low income and struggle to make ends meet. We are incredibly concerned about the people in later life who will be cut off from a vital source of income worth up to £300 at a time when their bills are rising.  

“We urge the UK Government to delay its Winter Fuel Payment decision to ensure the lives of older people in financial hardship are not put at risk as we approach winter. Last winter we spoke to too many older people who were forced to make painful cutbacks to reduce their energy bills. We heard distressing accounts of people going to bed in hats and coats and living in only one room as it was cheaper to heat. If the UK Government goes ahead with restricting the Winter Fuel Payment, before it has an effective way to ensure everyone who needs the financial support receives it, this could be the reality for more and more older people.  
“Longer term, the new UK Government has an opportunity to help protect older people in financial hardship from future spikes in energy costs by introducing a single energy social tariff. This could provide much needed financial security for the 2 million people in later life currently living in poverty, as well as future generations.”  

Gareth Kloet, Spokesperson for Go.Compare Energy said “Today’s announcement will be a disappointment for many, particularly as we’ve been seeing the price cap drop in recent months. The timing is also unfortunate, given we are about to head out of summer and into the colder months, where energy usage naturally increases. And with the recent news that the winter fuel allowance will be withdrawn for some billpayers, this winter’s price hike could hit many households especially hard.

“However, despite today’s announcement that the price cap will increase in October, it’s worth remembering that it will still be 10.7% lower than the energy price cap was in the same period for 2023, which was £1,923.  What it does demonstrate is that the UK energy market is still vulnerable to fluctuations as we remain dependent on the changes in the wholesale price of gas. 

“From a billpayer’s perspective, the news of the energy price cap is always a good reminder to think about your current energy contract – especially now the market is slowly opening up and there are some deals available.”

Richard Neudegg, Director of Regulation at Uswitch.com, said “The news of a 10% rise in energy rates from October is a harsh reminder of how quickly the energy market can reverse course. The good news is, households don’t have to put up with the uncertainty of rising bills, as right now there are fixed deals available that are cheaper than the new price cap.

“The cheapest 12 month fixed tariff, for the average household, is currently £1,592, representing a £125 annualised saving against October’s price cap, and offers protection against another potential rise in January.”

Richard Lane, Chief Client Officer at StepChange Debt Charity, said “While some households may not have felt the squeeze quite as much in recent months due to the warmer summer weather and a slight fall in the cost of energy, for many – particularly those on the lowest incomes – affording energy bills each month remains uncertain.

“For our clients struggling with energy arrears, levels of debt have risen over the past year regardless of the price cap being lower than it was in 2022/2023. With other essential costs such as housing putting long-standing pressure on people’s budgets, it’s a worry that a rise in the price cap may tip struggling households into deeper debt.

“To overcome this cycle of financial hardship and allow households some protection from the fluctuation in the cost of energy, the new Government must urgently introduce targeted support for those struggling, while addressing the £3bn worth of energy debt that has built up. Too many households are facing fragile budgets, in which even slight rises in the cost of utilities will push them into the red.”

Steve Vaid, Chief Executive at the Money Advice Trust, the charity that runs National Debtline, said “Rising energy prices come at a difficult time for people who are already struggling with their bills, as winter hits and energy usage goes up.With energy arrears already at record levels, the Government must act to provide support to households in difficulty.  

“The Help to Repay scheme we have proposed, which would provide repayment matching and debt write off options, is urgently needed and could help hundreds of thousands of households currently trapped with unmanageable energy arrears.”  

Joanna Elson CBE, Chief Executive at Independent Age said “Today’s price cap announcement shows that the drop in prices earlier in the year was only a brief moment of respite, and energy prices will rise yet again by 10%, from an average of £1,568 per year to £1,717. As the weather starts to turn colder, older people in financial hardship up and down the country are worried about their budgets. Many are on a low fixed income, and they will now need to find more money to cover their rising energy bills.  

“To make matters worse for older people in poverty, this bill increase coincides with the ending of the Winter Fuel Payment for people not receiving Pension Credit. There could be up to 1.2 million older people eligible for Pension Credit who don’t receive it. On top of that, many are just above the eligibility threshold but still live on a low income and struggle to make ends meet. We are incredibly concerned about the people in later life who will be cut off from a vital source of income worth up to £300 at a time when their bills are rising.  

“We urge the UK Government to delay its Winter Fuel Payment decision to ensure the lives of older people in financial hardship are not put at risk as we approach winter. Last winter we spoke to too many older people who were forced to make painful cutbacks to reduce their energy bills. We heard distressing accounts of people going to bed in hats and coats and living in only one room as it was cheaper to heat. If the UK Government goes ahead with restricting the Winter Fuel Payment, before it has an effective way to ensure everyone who needs the financial support receives it, this could be the reality for more and more older people.  
“Longer term, the new UK Government has an opportunity to help protect older people in financial hardship from future spikes in energy costs by introducing a single energy social tariff. This could provide much needed financial security for the 2 million people in later life currently living in poverty, as well as future generations.”  

Gareth Kloet, Spokesperson for Go.Compare Energy said “Today’s announcement will be a disappointment for many, particularly as we’ve been seeing the price cap drop in recent months. The timing is also unfortunate, given we are about to head out of summer and into the colder months, where energy usage naturally increases. And with the recent news that the winter fuel allowance will be withdrawn for some billpayers, this winter’s price hike could hit many households especially hard.

“However, despite today’s announcement that the price cap will increase in October, it’s worth remembering that it will still be 10.7% lower than the energy price cap was in the same period for 2023, which was £1,923.  What it does demonstrate is that the UK energy market is still vulnerable to fluctuations as we remain dependent on the changes in the wholesale price of gas. 

“From a billpayer’s perspective, the news of the energy price cap is always a good reminder to think about your current energy contract – especially now the market is slowly opening up and there are some deals available.”

Richard Neudegg, Director of Regulation at Uswitch.com, said “The news of a 10% rise in energy rates from October is a harsh reminder of how quickly the energy market can reverse course. The good news is, households don’t have to put up with the uncertainty of rising bills, as right now there are fixed deals available that are cheaper than the new price cap.

“The cheapest 12 month fixed tariff, for the average household, is currently £1,592, representing a £125 annualised saving against October’s price cap, and offers protection against another potential rise in January.”