British households are facing another rise in energy bills this winter as the continuing conflict in the Middle East drives up wholesale prices and threatens to deepen the cost-of-living squeeze.
Ofgem is due to announce on Wednesday the latest energy price cap for October to December, with forecasts pointing to an increase of about 4 per cent for a typical household in England, Scotland and Wales.
The increase would come just as households begin switching their heating back on, amplifying the financial impact of higher unit prices.
Cornwall Insight expects the annual bill for a typical household to rise to £1,729 from £1,663 under Ofgem’s revised definition of average consumption, which took effect in July.
On the previous consumption basis, the equivalent figure would be £1,941, compared with £1,862 currently.
That would put the average household bill at its highest level since July 2023.
The latest pressure has come from a combination of geopolitical turmoil and extreme weather. The conflict in the Middle East has pushed wholesale energy markets higher, while heatwaves across Europe have increased demand for gas-fired electricity generation as households and businesses turn up air conditioning.
The increase is particularly awkward for ministers because the Government has already promised measures intended to soften the blow.
The planned removal of VAT from household electricity bills is expected to reduce the annual Ofgem cap by about £45 from October.
But Cornwall Insight said the recent rise in global energy prices had more than cancelled out the benefit.
The Government insisted it was taking action to protect consumers.
“Tackling the cost of living remains a key priority for this Government and we know families will be worried by the prospect of higher energy bills this winter,” a spokesman said.
“We’re acting to give consumers breathing space with the cost of living – cutting VAT on energy bills, ensuring around six million households get the £150 warm home discount this winter, and making millions of homes cheaper to run through our warm homes plan.
“Alongside our efforts to support rapid de-escalation in the Middle East, we will do everything we can to shield consumers from global energy shocks and bring down bills for good.”
But the energy industry warned that temporary interventions were failing to address the underlying problem.
Dhara Vyas, chief executive of Energy UK, said: “Too many households continue to feel the strain of high energy bills. Instead of relying on stop-gap, ad hoc or emergency measures, we need a better, targeted and more permanent way to give people confidence that they’ll get help when they most need it.
“The current arrangements fail to provide the help needed and work out more costly.
“Household energy prices are set to increase further for British households.”
The latest increase would underline the vulnerability of British consumers to international energy shocks, despite government efforts to reduce bills through domestic policy.
For millions of households, the timing could hardly be worse: the latest rise is arriving just as winter demand begins to climb, leaving families facing higher bills before the coldest months have even arrived.
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