Energy price cap to increase to £4,279

Energy regulator Ofgem has announced its quarterly update to the energy price cap for the period 1st January – 31st March 2023.

The price cap is set to rise to an annual level of £4,279 in January 2023, but bill-payers remain protected under the government’s Energy Price Guarantee (EPG).

The energy price cap level indicates how much consumers on their energy supplier’s basic tariff would pay if the EPG were not in place.

The price cap has been in place since January 2019, and it is a legislative requirement for Ofgem to regularly review the level at which it is set. It ensures an energy supplier can recoup its efficient costs, whilst making sure customers do not pay a higher amount for their energy than they should. The price cap, as set out in law, does this by setting a maximum suppliers can charge per unit of energy.

For the first three months of 2023, the energy price cap will increase to an annual level of £4,279 for an average dual fuel household paying by direct debit based on typical consumption, but bill-payers will still be protected by the Government’s Energy Price Guarantee until the end of March 2024, as confirmed by the Chancellor on Thursday 17 November.

There is no immediate action for consumers to take as a result of today’s announcement. However, the government’s energy price guarantee means households will be protected from the increase.

Introduced on 1 October, the guarantee limits how much the typical household pays for its wholesale energy, taking the average annual bill to £2,500. The government cap will be in place until April next year, when the threshold is raised to £3,000.

Ofgem continues to protect consumers through its ongoing robust regulation of the market, taking enforcement action where necessary and providing support to those who need it the most. Earlier this week, Ofgem set out its proactive action to ensure that consumers are protected this winter and beyond.

The next quarterly price cap update will be on 27th February 2023.

Commenting on the rise, Jonny Marshall, Senior Economist at the Resolution Foundation, said “Today’s price cap announcement illustrates just how much support the government is providing with energy bills this winter – around £630 over three months for a typical bill payer.”

“The £16 billion cost to the Exchequer is eye-watering, but a price worth paying in order to avoid an already acute cost-of-living crisis getting dangerously worse over the cold winter months. This is highlighted by the extra support costs needed for families in badly insulated properties, coming at a cost to the government of £200 per home.”

“Support with energy bills is due to be massively scaled back next year. But with future gas prices highly volatile, we’re unlikely to have heard the last word on how households are supported through this crisis.”