The average household energy bill will rise by £94 a year from January after Ofgem increased its price cap in response to rising wholesale prices.
Energy regulator Ofgem announced it is raising its price cap from the current £1,834 for a typical dual fuel household to £1,928 from January 1.
It is driven almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine.
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.”
The energy price cap sets a limit on the maximum amount suppliers can charge households in England, Wales and Scotland for each unit of gas and electricity.
Energy consultancy Cornwall Insight said that the forecasts suggest that the typical bill will then fall to £1,853 from the start of April, but will not drop below today’s level until July next year.
Cornwall Insight said recent milder weather was helping to bring down gas prices, and this could help reduce bills next year if it continued.
But “sharp price falls are not expected”, it said.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “An unstable wholesale energy market, coupled with the UK’s reliance on energy imports, makes it inevitable that energy bills will rise from current levels.
“This leaves households facing yet another winter with bills hundreds of pounds higher than pre-pandemic levels, and affordable fixed deals few and far between.”
He added: “The King’s Speech acknowledged that it is our exposure to volatile international energy markets that has led to higher and less predictable bills.
“While we continue to advocate for immediate targeted support for vulnerable consumers, it is evident that the only enduring solution lies in transitioning the UK away from the influence of global energy prices towards sustainable, domestically sourced energy.”
Emily Seymour, energy editor at consumer magazine Which?, said: “If you are concerned about struggling to pay higher bills, don’t suffer in silence – there is help available. Speak to your energy provider about a payment plan you can afford and check to see if you qualify for any government schemes.
“We’d recommend that everyone without a smart meter takes a meter reading on or close to December 31 to make sure they don’t overpay for any energy used before the new price cap takes effect. Submitting meter readings on a regular basis is a good idea, and makes sure you are billed correctly.”
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