Home Business News Ofgem raises the energy price cap due to market instability and rising wholesale prices

Ofgem raises the energy price cap due to market instability and rising wholesale prices

by LLB Finance Reporter
23rd Nov 23 11:32 am

Ofgem has announced that the average household energy bill will rise in January by £94 in response to rising wholesale prices.

The price cap will rise from the current price from £1,834 to £1,928 for a typical duel fuel house from 1 January 2024.

The regulator said that this is driven by rising costs in the international energy market, global events such as the war in Ukraine and market instability.

Ofgem chief executive Jonathan Brearley said, “This is a difficult time for many people, and any increase in bills will be worrying.

“But this rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay.

“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.

“We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around, with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap.

“People should weigh up all the information, seek independent advice from trusted sources and consider what is most important for them, whether that’s the lowest price or the security of a fixed deal.”

Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Earlier this year, it seemed like the outlook for consumer bills was improving, with bills gradually falling after the dramatic rises post Russia’s invasion of Ukraine.

“However, as is often the case in the energy market, new challenges have arisen, and our reliance on foreign energy has once again left the UK vulnerable to price increases caused by events around the globe.

“With little in the way of direct energy bill support coming out of the autumn statement, consumers are likely to look at lowering energy usage to counteract high bills – particularly given that bills remain well above their historic averages.

“However, as we move through 2024, it’s not just the persistently high unit costs that will be a worry; the looming rise in electricity standing charges from April adds another layer to the equation.

“Fundamentally, the solution extends beyond tweaking energy bills, given the underlying cause of rising energy bills over the last 24 months.

“We need a long-term strategy that reduces our dependence on imports of energy – particularly gas.

“By investing in domestic renewable energy sources, we can start to break free from the international market fluctuations and stabilise our energy prices for homes and businesses alike.”

Gillian Cooper, director of energy at Citizens Advice, said, “Prices going up during the coldest part of the year will make life harder for millions of people already struggling to pay their bills.

“We’re already helping record numbers with energy debt and we’re seeing more people than ever who can’t afford to top up their prepayment meter.

“Yesterday, the Government missed the opportunity to announce extra support for households who desperately need it this winter.

“The lack of action means far too many households will now be forced to choose between heating and eating this winter.

“We urgently need the Government to honour its commitment to look at options for providing targeted financial support with energy bills from April 2024.”

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