Energy regulator Ofgem has increased the gas and electricity price cap by 10 percent, prompting warnings that it will hit people already struggling with the cost of living crisis.
The price cap, which determines how much an energy supplier can charge, is set every three months by the regulator.
In its latest review, Ofgem said it would increase the cap to £1,717 for the three months from 1 October to 31 December, 2024, up from the cap level of £1,568, set for 1 July to 30 September 2024.
Extra £149 cost
Ofgem said this will mean that the price for energy for a typical household will go up by £149 per year, adding around £12 a month to an average bill.
The regulator emphasised that the new cap level is 6 percent, or £117, lower than it was for the same three month period in 2023, when the cap was set at £1,834.
However, debt charity StepChange said that after more than two years of inflated energy costs, it is concerned that many households are still struggling to afford their bills and repay energy debt. This is despite prices falling in recent months.
The charity said energy price increases may make things worse for people who are already struggling as it coincides with the arrival of the colder weather.
Significant cost challenge
StepChange said energy costs remain a significant challenge for its clients, as the average amount of energy debt per charity client has risen by 29 percent year on year – from £1,679 in the first half of 2023 to £2,260 in the first half of 2024.
It has urged the government to introduce urgent targeted support for struggling households.
Richard Lane, chief client officer at the charity, said: “While some households may not have felt the squeeze quite as much in recent months due to the warmer summer weather and a slight fall in the cost of energy, for many – particularly those on the lowest incomes – affording energy bills each month remains uncertain.”
Tipping point
Lane continued: “For our clients struggling with energy arrears, levels of debt have risen over the past year regardless of the price cap being lower than it was in 2022/23. With other essential costs such as housing putting long-standing pressure on people’s budgets, it’s a worry that a rise in the price cap may tip struggling households into deeper debt.
“To overcome this cycle of financial hardship and allow households some protection from the fluctuation in the cost of energy, the new government must urgently introduce targeted support for those struggling, while addressing the £3 billion worth of energy debt that has built up. Too many households are facing fragile budgets, in which even slight rises in the cost of utilities will push them into the red.”
Danni Hewson, head of financial analysis at AJ Bell, said: “Energy prices might not be heading back to where they were in 2022, and they might not even be creeping back to where they were last autumn, but for many people having to find an extra £149 a year will be akin to pouring fresh salt on healing wounds.”
He continued: “Inflation might now be hovering around ‘normal’ levels, but the price hikes experienced over the past couple of years have dented people’s standard of living and they will be faced with another winter where they’re having to watch thermostats like a hawk. And there are already warnings that January could bring another small increase to energy prices.”
