MILLIONS of households will see their energy bills rise by almost £100 a year within weeks – and possibly again from next spring.
The new Ofgem price cap takes effect from January 1, 2024, meaning the average household will fork out an extra £94 a year.
GettyOfgem is increasing its price cap from next month[/caption]
In total, the price cap will rise from £1,834 to £1,928, with the price of a unit of electricity increasing from 27.35p per kWh to 28.62p per kWh.
Meanwhile, the unit rates for gas will rise from 6.89p per kWh to 7.42p per kWh.
Over four million households on prepayment meters will continue to receive a Government-backed discount to ensure they aren’t charged more than those who pay by direct debit.
Of course, the price cap is just a cap on what providers can charge customers per unit of energy.
So the £1,928 figure is calculated based on what Ofgem thinks an average household will use.
That means you could pay more or less than the figure depending on your usage.
Also be wary that the exact unit rates and standing charges that you pay will vary slightly based on your supplier, where you live and how you pay for your gas and electricity costs.
It comes after Ofgem today set out proposals to lift its price cap from April next year.
The regulator would make a one-off adjustment of £16 – equivalent to £1.33 a month – to be paid by households between April and March, 2025.
The price rise has been proposed to cover energy customers who have fallen into debt they are unlikely to repay, and reduce the risk of firms going bust or leaving the market because they can’t recover that debt.
Ofgem is proposing to up its price cap to recover an almost £3billion debt pile from struggling customers and spread it among all British households.
Ofgem is yet to set its price cap from April 1 next year, so it’s not yet clear whether households would effectively see the price they pay on their bills fall from the previous three months, even with the £1.33 a month hike.
Analysts at Cornwall Insights say the price cap will fall to £1,819.60 from April 1, which would mean an average fall.
However, this figure is not yet confirmed and could change.
Tim Jarvis, director general for markets at Ofgem, said: “The record level of debt in the system means we must take action to make sure suppliers can recover their reasonable costs, so the market remains resilient, and suppliers are offering consumers support in managing their debts.
“The proposals set out today are not something we take lightly. However, we feel that they are necessary to address this issue.
“This approach will ensure the costs are recovered fairly, without penalising a particular group of customers.”
How to save money on energy bills
Energy bills have fallen significantly over the last few months, but they’re still much higher compared to two years ago, when they were £1,216 for the average household paying by direct debit.
So you’ll want to do everything you can to save money where possible, including cutting back your energy usage.
You can do this through any number of ways, including buying items that mean you don’t have to put the heating on.
For example, it might be worth purchasing and sticking a portable fan heater on.
Home Bargains is selling one for just £10, which costs just 27p an hour to run and could save you on your bills.
You could try an electric blanket from the retailer too – it’s selling one for just £13.
Meanwhile, devices like draught excluders or heated throws can be great ways to save on bills.
You might even be able to get free money to help cover the cost of bills too, via the Household Support Fund (HSF).
The latest round of funding is worth £842million and has been distributed among local authorities.
That means what you are entitled to varies depending on where you live, although in most cases help is offered to those on benefits or a low income.
You should contact your local council to see what help is available. You can find your local authority by using the Government’s online locator tool.
Meanwhile, a number of energy firms are paying customers to cut down their usage through the Demand Flexibility Service (DFS).
The service encourages households to reduce their energy when there is high demand on the network.
So far, 37 suppliers have signed up to the scheme, so it’s likely yours will be. Get in touch with your provider for more information.
You can also join our new Sun Money Facebook group to share stories and tips and engage with the consumer team and other group members.