Energy Price Cap Update This Winter

The average household energy bill in the UK is projected to increase by 9% in October, reaching £1,714 annually, according to energy consultancy Cornwall Insight. This rise follows a previous average of £1,568 and is attributed to the upcoming adjustment of the energy price cap, which is set to be announced by the energy regulator Ofgem on August 23. Craig Lowrey, a principal consultant at Cornwall Insight, expressed concern over the timing of this increase as households prepare for the colder months. Lowrey noted that while there had been hopes for a return to pre-crisis pricing following two consecutive falls in the cap, the lingering effects of the energy crisis have resulted in a volatile market. He emphasized that, although extreme prices from previous years are not expected to return, the current situation may represent a new normal for energy costs. Ofgem's price cap, which was introduced in January 2019, sets maximum charges for energy suppliers based on wholesale market prices and is reviewed quarterly. In light of the rising costs, Lowrey called for immediate action to alleviate the financial strain on households, suggesting the introduction of social tariffs and reforms to the price cap. He also advocated for a long-term strategy focused on enhancing domestic energy production to ensure affordability and security in the energy sector. As the energy price cap is set to change, it is important to note that the cap does not limit total energy bills but rather caps the unit rates for gas and electricity. The actual bill will depend on individual consumption, with regional variations also influencing costs. The final confirmation of the price cap will be made on August 23, with further predictions for January still uncertain.