The Energy Price Cap is set to rise by 10% this October, meaning many households will be facing increased bills.
Changes to the Price Cap
The Energy Price Cap is set to rise by 10% from October due to an increase in wholesale energy prices in recent months.
“This rise means this winter many will still be paying nearly double what they were pre-crisis. From 1 October, the vast majority of homes in England, Scotland & Wales will see costs jump 10% – so for every £100 you pay today, you’ll typically pay £110. To be more accurate, as most of the rise is on the unit rate not the standing charge, higher users, especially those with gas, will overall see their costs rise by more than 10%, lower users less.” – Martin Lewis
For those on fixed rate tariffs, their energy bills will remain unaffected. This is because with fixed rate tariffs, your unit rate and daily standing charge remain fixed. Even if the wholesale price of energy changes, you still pay the rate your agreed upon with the supplier for the remainder of your contract.
However, those on variable rates will see their energy bills go up from this October with these changes to the price cap.
Further Rises Predicted
Cornwall Insight currently predict that the Energy Price Cap will rise by a further 3% in January 2025.
They say that these increases will add pressure on the government to introduce measures like social tariffs to help vulnerable households cope with these hikes in price. They also added that this could increase calls for a reform, or even scrapping, of the price cap.
The key reason for this increase in bills is the rise of wholesale prices, with the UK’s reliance on gas imports making it vulnerable to any volatility in the international energy market.
The UK currently sources around 50% of gas supplies from imports from various countries around the world, the largest share of these coming from Norway (who make up 87% of our gas imports).
Ofgem’s Consultation on Standing Charges
The price cap increase from this October is mainly driven by higher unit rates, but standing charges will also increase slightly. This standing charge is a daily fee charged by your energy provider for being connected to the gas grid or electricity network, which you pay regardless of how much energy you actually use.
Ofgem has recently published a consultation on options to reduce standing charges. They are collecting people’s views and feedback on these options until the 20th September, so feel free to have your say using their online form.