Starting from January, many households in the UK will experience an increase in their energy bills, as the regulatory body Ofgem has raised the price cap by 5%.
This adjustment is a response to the recent surge in wholesale energy prices, which have been on the rise.
British citizens are already grappling with a cost of living crunch, and the government is contending with inflationary pressures.
While there was a recent slowdown in inflation, it was, in part, due to lower energy costs.
Ofgem’s CEO, Jonathan Brearley, explained that the price cap increase is a reflection of the increasing wholesale costs of gas and electricity, which ultimately affects the prices consumers pay.
Wholesale gas prices in the UK have surged by approximately 30% since the beginning of September. This rise in prices typically occurs during the winter months when demand for heating increases.
However, it has also been influenced by global factors such as the conflict in Ukraine.
Concerns have been raised by charity groups about the impact of higher energy costs on households, especially given the reduced government support available during this winter season.
Last winter, when the price cap was considerably higher, most households received a £400 ($498) reduction in their bills.
The National Energy Action, a fuel poverty group, revealed that one in four people struggled to pay their energy bills in the last three months.
While acknowledging the challenges ahead for some households, Ofgem’s Brearley also pointed out that consumers might find cheaper energy deals on the market.
Additionally, there is government support in place for approximately 3 million vulnerable families eligible for the Warm Home Discount, which provides a £150 reduction on energy bills.
Many of the most vulnerable households are also eligible for £900 in cost-of-living support for the fiscal year 2023/24.
The new price cap set by Ofgem stands at £1,928 annually for average electricity and gas usage, an increase of £94 from the previous cap.
This price cap was initially introduced in 2019 to safeguard consumers, and it currently covers about 29 million customers on standard rate tariffs.
With energy bills set to rise, many British households will be looking for ways to manage their expenses during this challenging period.