Energy price cap: Bills to rise by more than expected in April

Energy bills for a typical household will rise by more than £100 a year in April under regulator Ofgem’s new cap – a higher than expected increase adding pressure on people’s finances.

The 6.4% increase means a household using a typical amount of gas and electricity will see their annual bill rise by £111 a year, or £9.25 a month, taking the total bill to £1,849 a year.

The cap, which is set every three months and puts a limit on the amount suppliers can charge for each unit of energy, affects the bills of 22 million homes in England, Wales and Scotland.

Ofgem said billpayers should consider switching to a fixed tariff, although there are predictions of prices falling again in July.

Analysts had forecast a 5% rise in prices in April, before Ofgem’s announcement on Tuesday. The higher than expected jump means bills in April will be £159 year more than they were in April 2024.

The regulator said rising wholesale costs and inflation are behind the latest price hike – the third consecutive increase in the quarterly cap.

The energy bill rises will hit people’s finances at the same time as water and council tax increases, although average wages are also going up.

Standing charges – which are fixed fees to connect to a gas and electricity supply and vary by region – are also going up again for gas but dropping for electricity, with some customers in London and the North Wales and Mersey region seeing an overall increase of up to £20 a year.

Jonathan Brearley, Ofgem’s chief executive, said that prices remained a huge challenge for many people and accepted another increase was “unwelcome”.

Mr Brearley said customers, where possible, should consider “switching or fixing tariffs now” to try to lower costs and “provide certainty over coming payments”.

“If anyone is worried about paying their bills, I would urge them to reach out to their supplier to make sure they’re getting all the help they can,” he added.

About four million households have done so in recent months, according to Ofgem figures.

Martin Lewis, founder of Money Saving Expert, told the BBC that moving to a fixed deal was a “no-brainer”.

People should check whole-of-market comparison sites for the best deal, and wait a little while before choosing a new tariff as he has heard some “good tariffs are being launched” by energy firms, he said.

However, analysts at consultancy Cornwall Insight have forecast variable prices could fall again in July to close to the current level.

While the cost of each unit of gas and electricity is capped, the total bill is not, so household bills will vary depending on how much energy is used.

The regulator illustrates the cap by showing the impact on the annual bill of a household with typical energy usage.

At a mum and baby sensory class in Manchester, parents said rising bills were a constant worry.

“We have definitely felt a difference in the quality of life we can afford now,” said Michelle Gill, 35, who attended the session with her baby, Ori.

“It’s more of a conscious effort – things we didn’t think about a year ago are now at the front of our mind.”

Melissa Rawling, mum of baby Ezra, has a variable tariff with British Gas.

“Because we have a baby, we have to keep the heating on more but it’s not what we would like to be doing,” the 32-year-old said.

“Before we had him, we would just put extra layers on but that’s not the case now.

“I’m more conscious of being out during the day so we don’t have to keep the heating on. We can’t spend all day at the park when it’s cold so things like this class are ideal for keeping warm.”

Bills are about 50% higher than pre-Covid levels, but remain below the peak reached in 2022 when Russia’s full-scale invasion of Ukraine caused energy prices to spike.

Ofgem director general of markets, Tim Jarvis, told the BBC that the latest price rises were being driven by the international price of gas, which he said had gone up “significantly” in the early months of this year.

He said he understood consumers were frustrated and annoyed by the high profits made by some energy firms, but added the price cap was a method Ofgem used to cap those profits.

However, charities said the increase in prices would be a painful blow for billpayers.

Citizens Advice said its research suggested 6.7 million people in England, Wales and Scotland were in debt to their energy supplier. Official figures show nearly £4bn is owed.

“We’re helping people every day who simply can’t afford this latest price hike,” said its chief executive, Dame Clare Moriarty, adding the charity was particularly concerned about households with children.

The government has announced it is planning to extend the number of people who qualify for the Warm Home Discount scheme next winter – which gives some people on benefits a reduction of £150 from their annual energy bill.

The next change in prices means in April:

• Gas prices will be capped at an average of 6.99p per kilowatt hour (kWh), and electricity at 27.03p per kWh – up from 6.34p and 24.86p respectively. A typical household uses 2,700 kWh of electricity a year, and 11,500 kWh of gas
• Households on pre-payment meters are paying slightly less than those on direct debit, with a typical bill of £1,803
• Those who pay their bills every three months by cash or cheque are paying more, with a typical bill of £1,969
• Standing charges – a fixed daily charge covering the costs of connecting to a supply – have dropped to 53.8p a day for electricity but risen to 32.67p a day for gas, compared with 60.97p and 31.65p respectively, although they vary by region

The regulator has extended the Debt Allowance Scheme – a charge for all customers to cover the cost of that debt support – until something different is done to deal with the amount of debt being accrued.

In response to the latest price increase announcement, Energy Secretary Ed Miliband said the government was determined to protect people, by extending the Warm Home Discount and encouraging energy creation in the UK.

For the Conservatives, acting shadow energy secretary Andrew Bowie said the price rise was “a betrayal to the families who Ed Miliband promised to save £300 on their bills”.

Liberal Democrat leader Ed Davey repeated his demand for a reversal to cuts to the number of pensioners eligible for the Winter Fuel Payment.

“The least they could do is to ensure bills for those impacted to do rise further,” he said.

Experts have shared three tips to keep on top of energy use during the warmer months:

• If your hot water is too hot to wash your hands in, then your setting is too high so turn the boiler down
• Manage your draughts, such as putting a black bag with scrunched up paper up an unused chimney, or limit other draughts around the home
• Limit time in the shower to four minutes. The charity WaterAid has compiled a playlist of four-minute songs to keep you to time

Read more here if you are struggling to pay energy bills