Typical annual energy bills will rise by £60 to £1,723 in October, under regulator Ofgem's latest energy price cap. The increase of around 4% in the cap affects millions of people in England, Scotland and Wales, and reflects higher wholesale gas costs which have been pushed up by the US-Israel war with Iran. The energy cap fixes the maximum amount which customers on standard variable tariffs can be charged for each unit of gas and electricity used.
It covers around 33 million households in England, Wales and Scotland and is set by the regulator Ofgem every three months, external. around 7 million pay by standard credit (they pay when they get a bill) Most of the increase in the energy price cap is driven by higher gas prices. Gas bills are rising by 8%, which means households that do not use gas will see an energy bill increase of less than 1%. The government's decision to remove VAT from domestic electricity bills has also affected the new price cap - Ofgem says the typical annual bill would have been £45 higher without that cut.
The typical annual usage figure applies to the first category: dual-fuel households on a standard variable tariff which pay by direct debit. But customers' actual bills depend on the amount of energy used and how they pay for it. For the roughly 11 million households on fixed tariffs, they will not be affected by this increase.
Ofgem regulates the energy market in England, Scotland and Wales. Northern Ireland has a separate system. Although the price cap sets the unit prices for gas and electricity, your household's actual bill depends on the overall amount of energy you use, and how you pay for it.
Where you live, the type of property you have, how energy efficient it is, how many people live there, and the weather all make a difference. The Ofgem cap is based on "typical" household energy use in a year with a single bill for gas and electricity settled by direct debit. The vast majority of people pay their bill this way to help spread payments across the year.
The regulator has previously calculated that a "typical" household uses 11,500 kWh of gas and 2,700 kWh of electricity in a year. However, it is reducing this "typical" energy use because many households have cut back due to high prices in recent years and are benefiting from improvements in energy efficiency. Its new estimates assume annual use of 9,500 kWh of gas and 2,500 kWh of electricity.
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