UK energy price cap to rise by 9% in October

UK households are set to face higher energy bills this October as the energy price cap is forecast to rise by £146, bringing the average annual cost to £1,714.

This 9% increase, predicted by consultancy Cornwall Insight and due to be confirmed by Ofgem on 25 August, reflects the ongoing volatility in global energy markets and rising wholesale prices.

The energy price cap, introduced by Ofgem in 2019, limits the amount energy suppliers can charge per unit of gas or electricity.

The cap is reviewed every three months and adjusted to reflect changes in the wholesale energy market.

This latest increase follows a period of relative stability earlier in the year but highlights the market’s sensitivity to global events, particularly the ongoing conflict in Ukraine, which has disrupted supply chains.

As a result, energy prices have rebounded from their previous lows, leading to this forecasted rise.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight, highlighted the challenges this poses, noting that while prices have stabilized somewhat compared to the past two years, the market remains highly volatile.

“The lingering impact of the energy crisis has left us with a market that’s still highly volatile and quick to react to any bad news on the supply front,” Lowrey explained.

What is the Energy Price Cap?

The energy price cap sets a maximum limit on what suppliers can charge for each unit of gas or electricity. It includes both the standing charge—a daily fixed cost that consumers pay regardless of their usage—and the price per kilowatt hour (kWh) of energy consumed. The cap is intended to protect consumers from unfair price hikes, particularly those who are on default or standard variable tariffs.

For the current quarter (July-September 2024), the price cap rates are 22.36p per kWh for electricity and 5.48p per kWh for gas. These rates are set to rise in October, contributing to the higher overall costs for households.

Impact on Vulnerable Households

The increase in the price cap is expected to hit vulnerable households the hardest. National Energy Action, a charity focused on tackling fuel poverty, has warned that the combination of higher energy prices and reduced eligibility for Winter Fuel Payments could push more families into financial hardship.

Adam Scorer, Chief Executive of National Energy Action, urged the government and Ofgem to act swiftly, stating, “Households will go into winter with less support and higher prices.”

Energy debt is already at record levels, exceeding £3 billion, which underscores the need for immediate action. Experts are calling for the introduction of social tariffs and long-term strategies to increase domestic energy production and reduce dependency on volatile global markets.

Looking ahead, Cornwall Insight has also forecasted that the price cap could rise further in January 2025, with global market tensions, particularly in Europe, potentially driving up costs even more. This ongoing uncertainty highlights the critical need for a robust and forward-thinking energy policy in the UK.