Millions of British households are facing another winter squeeze as Ofgem prepares to unveil a new energy price cap expected to push annual bills higher just as families turn on their heating.
The regulator will on Wednesday set the cap for October to December, with forecasts pointing to a 4% increase for a typical household using gas and electricity in England, Scotland and Wales.
The rise would mark another blow to consumers already battling elevated household costs, with analysts blaming renewed volatility in wholesale energy markets on the continuing conflict in the Middle East.
European heatwaves have compounded the pressure, driving greater demand for gas-fired power generation as countries ramp up electricity use for air conditioning and cooling.
Cornwall Insight expects a typical household’s annual bill to rise to £1,729, from £1,663 under Ofgem’s updated measure of typical consumption.
Using the previous methodology, the equivalent annual bill would be £1,941, compared with £1,862 currently.
That would leave household energy costs at their highest average level since July 2023.
The timing could prove particularly painful. The October cap will take effect just as temperatures fall and households begin increasing their use of central heating, potentially turning a modest percentage increase into a significantly larger winter bill.
The Government has attempted to cushion the blow by proposing to remove VAT from household electricity bills. The measure is expected to cut around £45 from the annual Ofgem cap.
But Cornwall Insight said the recent surge in global energy prices had more than offset the benefit.
A Government spokesman said: “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.
“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.”
The prospect of another increase is nevertheless exposing the vulnerability of Britain’s energy market to geopolitical shocks.
Energy UK chief executive Dhara Vyas argued that emergency interventions were no substitute for a permanent system of support.
She 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 looming cap increase comes as the energy industry faces an increasingly difficult balancing act, insulating consumers from volatile global markets while encouraging investment in domestic supply and the transition to lower-carbon power.
For households, however, the immediate calculation is simpler. Another winter of higher bills is approaching — and the latest Middle East energy shock threatens to arrive just as demand for heat begins to climb.
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