Households across the UK will see their energy bills climb by £221 annually from Wednesday, though there is growing optimism that further price hikes in October could be avoided. Ofgem’s price cap is set to increase by 13 per cent, or £18 a month, from 1 July, pushing the average annual electricity and gas bill to £1,862.
This significant rise was initially fuelled by soaring global energy costs, largely due to the Middle East conflict. The situation intensified when Iran, in response to US and Israeli attacks, blocked the critical Strait of Hormuz, a passage through which a fifth of the world’s oil and gas is transported.
However, an interim peace deal reached this month has seen the vital shipping route begin to reopen. This has already contributed to a reduction in oil and natural gas prices, with the latter being a key determinant of UK power bills. Consequently, analysts at Cornwall Insight now predict the energy price cap will remain relatively stable in October. This news offers considerable relief, easing fears of another increase just as households prepare to switch on their heating for the cooler months.
Ofgem will announce the next price quarterly cap level for October to December on or by August 26.
It leaves a question mark over whether the Government will launch any targeted energy support for the winter months.
While it is unclear who the Chancellor will be later this year, given the change in leadership after Sir Keir Starmer resigned, cost of living and bills pressures will be top of their inbox.
Chancellor Rachel Reeves said earlier this year she would consider some form of support in the autumn if necessary and if energy prices remain high.
Even though energy bills may not go up further in October, many will face a payment shock in the winter months unless prices come down.
Figures earlier this week from Ofgem showed debt owed to energy suppliers reached a new record high of £4.79 billion in the three months to March – a 5% increase on the last quarter and 15% higher year on year – as many people struggled with rising bills.
The boss of renewable energy supplier Good Energy has called on the incoming prime minister to reform the energy market, with measures he claims could cut bills by an extra £158 a year.
In a report called Rewiring the Market: How to Tackle the Hidden Causes of High Energy Bills, Good Energy is urging the Government to look at moving policy costs off energy bills and into general taxation, break the link between gas and electricity prices and incentivise clean energy investment with Bank of England loans to invest in renewable energy projects.
Nigel Pocklington, chief executive of Good Energy Group, said: “Over the past five years, we have witnessed a series of energy shocks due to conflict abroad, proving that our current system is neither fit for purpose nor structured in a fair way for households to pay for their energy.
“We need to urgently reform the way the market operates to deliver and incentivise a cleaner, more affordable energy system.”
He added: “The next prime minister must set out a clear plan for how Britain will move away from high gas prices and bring bills down for good.”
