MoneySavingExpert founder Martin Lewis had previously noted that the increase, driven by Middle East-related wholesale costs, largely offsets the Government’s VAT cut on electricity.
Energy prices are set to rise in October (Image: Getty)
Ofgem has announced a 4% rise in the energy price cap from October, pushing typical household bills to £1,723 a year – a three-year high. Ofgem said the price cap will rise by £60 per year – or £5 per month – for the average household using both electricity and gas if this level were sustained for a year.
This increase reflected higher wholesale gas prices as a result of the ongoing conflict in the Middle East, with volatile global markets remaining the dominant driver of price changes. Neil Kenward, Ofgem’s director general for markets, said: “High international gas prices are continuing to drive energy costs in the UK.
“We welcome the Government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter.
“Savings are available by choosing a fixed tariff, which are available at £100 or more below the October price cap, and many suppliers offer tariffs with cheaper electricity to smart meter customers for electricity consumed out of peak times.
“It’s also worth considering different payment methods, with prepayment customers paying the lowest price cap rates, and could save consumers an average of about £45 compared to direct debit.”
MoneySavingExpert founder Martin Lewis had previously noted that the increase, driven by Middle East-related wholesale costs, largely offsets the Government’s VAT cut on electricity.
The Government “will keep looking at what more we can do to protect families from unaffordable bills”, the Energy Secretary has said.
Reacting to the energy price cap rise, Miatta Fahnbulleh added: “Families will be understandably concerned about the cost of energy bills this winter, which is being driven up by the Iran war.
“Energy is an everyday essential and it needs to be affordable for everyone, which is why we have cut VAT on electricity bills from October, to give families some breathing space.
“This has limited the rise in the price cap and follows the £150 in costs we removed from bills earlier this year, and we will keep looking at what more we can do to protect families from unaffordable bills.”
Claire Coutinho MP, Shadow Energy Secretary, said: “Labour promised to cut energy bills by £300, but they have gone up by nearly £400 instead.
“Our Cheap Power Plan would cut energy bills for households and businesses by scrapping Government taxes and levies on bills, and it wouldn’t cost the taxpayer a penny. We have to put cheap energy first.”
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Nigel Pocklington, CEO of Good Energy said: “Today’s price cap announcement of an 4% increase is concerning as we head into winter and shows further action is needed to support households struggling with the cost of living.
“We welcome the Government’s decision to cut VAT on energy bills and will be passing those savings directly on to customers. But this reform is like patching a leaking pipe without fixing the source.
“If ministers want to deliver permanently lower bills, more ambitious action is needed. Immediate relief can be provided by moving remaining levies off bills and strengthening targeted support for vulnerable households.
“In the longer term, breaking the link between gas and electricity prices and making it cheaper to invest in homegrown renewable energy could reduce household energy bills by more than £270 a year.”
“The benefits would extend far beyond the price cap. Lower energy costs would reduce pressures on businesses, schools, hospitals and public services and reduce inflation. At a time when Britain is producing more lower-cost renewable power than ever, people should be seeing the benefit of that transition in their bills.”
Steve Vaid, Chief Executive of Money Advice Trust, the charity which runs National Debtline and Business Debtline, said: “Today’s announcement is another bitter blow to millions of households across the country. With bills set to rise yet again and customer energy debts climbing above £6 billion, government must act now to support struggling households and stem the rise in energy debt.
“One immediate step ministers can take is to implement the first phase of the Energy Debt Relief Scheme. The scheme would provide much-needed relief by allowing energy suppliers to write off debts that households built during the energy crisis through no fault of their own. The consultation has already taken place. What is needed now is decisive action to bring the scheme into effect.
“Energy debt remains one of the most common issues National Debtline advisers hear about. Without government intervention, more households risk being pushed into unmanageable debt.”