The Ofgem new price cap comes into force today with millions set to see their energy bills become more expensive.
A household using a typical amount of gas and electricity will see their annual bill go up by £94.
Energy regulator Ofgem has announced the annual bill for a household using a typical amount of gas and electricity, paying by direct debit, has now risen from £1,834 to £1,928.
Around 29 million Britons are on the price cap – but it is important to remember there isn’t a total cap on what one can pay for energy.
The price cap simply limits what people pay for each unit of gas and electricity they use, plus it sets a maximum daily standing charge (what one pays to have their home connected to the grid).
This means the more energy one uses, the higher their bill will be.
From today, direct debit households will be charged 7.42p per kilowatt hour (kWh) for gas and 28.62p per kWh for electricity. This is up from the 6.89p per kWh and 27.35p before.
Households on prepayment meters have seen their typical annual bill rise to £1,960.
Those who pay their bills every three months by cash or cheque now have a typical annual bill of £2,058.
Standing charges – a fixed daily charge covering the costs of connecting to a supply – have remained unchanged at 53p a day for electricity and 30p a day for gas, although they vary by region.
Ofgem said: “Every three months we review and set a level on how much an energy supplier can charge for each unit of energy. The increase in the price cap is because the cost of wholesale gas has gone up in recent months. This is due to world events including the conflict in the Middle East.
“Historically, people on prepayment meters have paid higher standing charges than Direct Debit customers. This is because it costs energy suppliers more to serve prepayment meter customers.
“The government is currently subsidising prepayment meter customers through the Energy Price Guarantee, to ensure that they pay no more for their energy than Direct Debit customers, but this support is due to expire at the end of March 2024.”
Ofgem said the amount of energy debt and arrears faced by gas and electricity customers swelled to £2.9bn between July and September.
Charities said arrears and borrowing to pay essential bills is a serious problem at this time of year.
The regulator is proposing adding £16 to a typical household bill between April and March 2025 to give suppliers the funds to offer prepayment plans and write off debts.
Fuel poverty charity National Energy Action is calling on ministers to introduce a help-to-repay scheme, as well as a discounted social tariff for those on benefits, and a home energy efficiency programme.
Alastair Douglas, CEO of TotallyMoney said: “With the energy price cap increasing this January, customers can expect to start paying even more to keep the lights on and homes warm. Two years of high inflation has already pushed people’s finances to the brink, and energy debt has since reached record levels of almost £3 billion.
“Although limited, there are grants and benefits available to the vulnerable, elderly and those with disabilities — so if you’re struggling, and you fall into one of these categories, then check to see if you’re eligible for support.
“The government regulator has also instructed energy companies to contact struggling customers and offer support — but that doesn’t mean you have to wait for them to reach out. Get in touch at the earliest convenience and see if they can offer you a temporary debt repayment holiday, or a debt repayment plan to best suit your situation.”
