Average energy bill to rise by £94 in January to hit £1,928, Ofgem reveals

The average household energy bill will soon rise by £94 to £1,928 a year, as regulator Ofgem today confirmed its price cap for January 2024.

The price cap limits the maximum amount an energy firm can charge for the units of gas and electricity consumers use, as well as daily standing charges.

Ofgem said the current £1,834-a-year average price-capped bill had to rise by 5 per cent because of increasing gas and electricity costs globally. 

The current price cap sets the energy bills paid by more than 80 per cent of UK homes, though the exact amount varies depending on gas and electricity use.

The headline price cap figure applies to households on variable-rate tariff energy deals paying by direct debit.

Power prices: Energy regulator Ofgem said bills would have to go up again in January 2024

The January £1,928 average  price cap will run for three months until it is reset again in April 2024.

Ofgem chief executive Jonathan Brearley said: ‘This is a difficult time for many people, and any increase in bills will be worrying. But this rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay.

‘It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.’

For those on pre-payment meters, average bills will rise from £1,861 now to £1,960 from January 2024 – a £99 increase.

Customers with standard credit meters will also pay an extra £99, with bills going from £1,959 to £2,058 for typical energy use.

For households with Economy 7 meters, electricity bills will go from £1,219 now to £1,272 in January, a £53 rise.

Homes that use more than £3,000 a year in energy will have their bills capped at this level due to the Government’s Energy Price Guarantee.

This is a Government scheme that sees the state pick up some of the tab for consumer gas and electricity bills.

It was launched at the level of £2,500 in October 2022, and was raised to £3,000 in July 2023.

Why has the Ofgem price cap become so important?

The price cap was brought in during January 2019 to stop energy firms overcharging customers on variable-rate tariffs.

Most households had fixed-rate energy deals at the time, and only moved onto variable-rate tariffs if they did not renew at the end of their term.

But after energy bills began rising in late 2021, gas and electricity companies responded by pulling all new fixed-rate deals from the market.

They did they to try to avoid the widespread collapse that affected many energy firms, which were suddenly being forced to sell power for far less than it cost them to buy it.

Because cheap fixed-rate deals had almost disappeared, almost all homes ended up on variable tariffs regulated by the Ofgem price cap.

Fixed-rate gas and electricity deals have started to return, but most rates are uncompetitive when compared to price-capped rates. 

What’s next for energy bills?

Ofgem does not make predictions about energy bills – but energy experts at analysts Cornwall Insight have accurately predicted price cap movements since late 2021.

Cornwall Insight thinks the typical price-capped energy bill will fall to £1,853.17 from 1 April 2024, then fall to £1,824.98 in the third quarter and rise slightly to £1,863.02 in October 2024.

This post first appeared on Dailymail.co.uk