Ofgem’s energy price cap is creeping up as the temperature goes down
As a wave of cold health alerts sweep across large parts of the UK, many households are bracing for an increase in energy bills this Thursday. The 0.2% hike to Ofgem’s energy price cap translates to an approximate monthly rise of 28p for the average household in England, Wales and Scotland that remains on a standard variable tariff.
This will push the average total bill up to £1,758 a year, a slight increase from the current £1,755. The regulator attributes the rise, announced back in November, to the funding of nuclear power projects and winter bill discounts for some households.
Among these is the Government’s Sizewell C nuclear power plant in Suffolk, which adds an average of £1 to each household’s monthly energy bills throughout the £38 billion construction period. A rise in standing charges – the daily rate consumers pay for energy supply to their homes – is largely due to costs associated with the Government’s Warm Home Discount scheme.
This winter, around 2.7 million more low-income households, including 900,000 families with children, qualify for the £150 discount. However, Ofgem points out that the new price cap is £37 lower than it was a year ago when adjusted for inflation.
Ofgem’s price cap sets a maximum rate per unit and standing charge that customers can be billed when they are not on a fixed tariff. It does not limit total bills because households still pay for the amount of energy they consume.
The price cap hike arrives at a particularly bleak moment in terms of weather, as a yellow warning for snow and ice has been put in place for areas of Scotland north of the central belt, running from 6am on New Year’s Day through to midnight on January 2. At the same time, amber cold health alerts have been declared for the North East and North West of England, set to stay active until noon on January 5, with the mercury predicted to plummet to 3-5C.
Yellow cold health alerts have been rolled out by the UK Health Security Agency (UKHSA) across London and the East, South East and South West of England, alongside the East and West Midlands and Yorkshire and the Humber. Simon Francis, co-ordinator of the End Fuel Poverty Coalition, remarked: “It really is a case of every little doesn’t help as households spend a fifth winter in the energy bills crisis. Tiny movements in the price cap still hit hard for families choosing between heating and eating.
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“People continue to live in cold, damp homes, where the risks go beyond discomfort and into real danger, including exposure to carbon monoxide. Younger adults, private renters and households with children are among those most at risk as people cut back on heating, delay repairs and try to block draughts just to stay warm.
“Meanwhile, the wider energy industry has made more than £125 billion in UK profits since 2020, including firms operating in a dying North Sea. This isn’t a crisis of scarcity, it’s a crisis of priorities. Ministers must move beyond short-term price cap tweaks and get serious about ending fuel poverty by investing in energy efficiency, reforming energy pricing, introducing a fair social tariff and fully funding the Warm Homes Plan.”
Which? energy editor Emily Seymour warned: “As we head into the coldest months of the year, many households will be concerned that the energy price cap will increase slightly in the new year.
“There are several deals on the market for lower than the price cap so now is a good time to shop around if you’re looking to fix. As a rule of thumb, we’d recommend looking for deals cheaper than the current price cap, not longer than 12 months and without significant exit fees.
“If you’re on a variable tariff, make sure to submit a meter reading to ensure you pay the cheaper rates for any energy used before the new price cap takes effect.”
