Campaigners hit out at the energy regulator Ofgem yesterday as it hiked the average household energy bill by £94 a year.
Charities warned the 5% rise would hit the most vulnerable hardest. The higher cap will also put an immediate dent in the Chancellor’s National Insurance tax cut of £450 per year on the average salary of £35,000.
The cap means the current £1,834 paid by a typical dual-fuel household will rise to £1,928 from January 1.
The increase was driven almost entirely by rising costs in the international wholesale energy market due to market instability and the wars in Ukraine and Palestine.
Peter Smith, director of policy at National Energy Action, said: “This price cap rise will be devastating for the people our charity tries to help. It follows the Autumn Statement, which offered no support to directly reduce energy bills.
“On the surface, it looks like bills aren’t increasing by much but it works out at a 5% rise in energy bills, with the typical household paying almost £100 more to heat and power their home.
“These are just averages. It will be much more if you live in an energy-efficient home or need to use more energy due to long-term illness, disability or if you have more people in your household.
“Householders currently owe £2.6billion on their energy bills and this number will soar this winter as the cold weather hits.
“Many people have already stopped using energy or are drastically rationing their use to save money – not heating their homes, not cooking hot meals, bathing in cold water.”
He added: “The situation will get worse after January when householders have to find even more money for their energy bills in the depths of winter.”
Jonathan Brearley, Ofgem chief executive, said: “We have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.
“We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around, with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap.”
The energy price cap sets a limit on the maximum amount suppliers can charge households in England, Wales and Scotland for each unit of gas and electricity. The headline price cap figure is an average across households rather than an absolute cap on bills, so those that use more will pay more.
Gillian Cooper, director of energy at Citizens Advice, said: “Prices going up during the coldest part of the year will make life harder for millions of people struggling to pay their bills.
“We’re already helping record numbers with energy debt and we’re seeing more people than ever who can’t afford to top up their prepayment meter. The Government missed the opportunity to announce extra support for households who desperately need it this winter.
“The lack of action means far too many households will now be forced to choose between heating and eating this winter.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “We warned Ofgem that a January price cap rise was a bad idea when the regulator consulted on this in 2022.
“Now the chilling effect of the change is being realised, the inhumanity of this policy is clear.”
Forecasts by Cornwall Insight suggest that the typical bill will fall back to £1,853 from the start of April, but will not drop below the current level until July next year.
Dr Craig Lowrey, principal consultant at the energy consultancy, said: “As we move through 2024, it’s not just the persistently high unit costs that will be a worry – the looming rise in electricity standing charges from April adds another layer to the equation.
“Fundamentally, the solution extends beyond tweaking energy bills, given the underlying cause of rising energy bills over the last 24 months.”
He added: “We need a long-term strategy that reduces our dependence on imports of energy – particularly gas.”
