Ofgem to hike energy price cap by 13pc

(Sharecast News) - Ofgem said the energy price cap will rise by 13% from July, as higher wholesale gas prices linked to the conflict in the Middle East feed through to household bills.

The regulator said the cap for the period from 1 July to 30 September would increase from £1,641 to £1,862 a year for a typical household paying by direct debit for gas and electricity under its existing consumption measure.

That equates to an increase of about £18 a month for a typical dual-fuel household if sustained for a full year.

Ofgem said the rise reflected a 28% increase in wholesale prices over the past three months, driven by continued volatility in global energy markets.

However, it said prices remained well below the peak of the 2022 energy crisis, when the government stepped in to cap bills at £2,500.

The increase would affect customers on default tariffs, which apply when households have not signed up to a fixed-rate deal.

Ofgem said around 40% of accounts, or about 22 million, are on fixed tariffs and would not be affected by the July rise.

Gas bills would bear the brunt of the increase, with prices set to rise by 24%, while electricity bills are expected to increase by around 5%.

Ofgem said the smaller increase in electricity reflected the growing share of renewable generation on the system and reduced reliance on gas to generate power.

From July, Ofgem was also updating its Typical Domestic Consumption Values to reflect lower household energy use.

It said households were using around 7% less electricity and 17% less gas than at the previous review, due to improved energy efficiency, warmer weather and the impact of higher prices.

On the updated consumption measure, the price cap from 1 July would be £1,663 a year.

"Today's price change reflects continued volatility in global energy markets," said Tim Jarvis, Ofgem chief executive.

"This means higher wholesale gas prices, driven by ongoing conflict in the Middle East, is impacting the price we pay for energy.

"We understand many will be concerned about rising prices.

"While energy use typically falls over the summer months, there are still practical steps households can take to manage costs, including exploring fixed tariffs or changing their payment method.

"Smart meter customers can also take advantage of half price or cheap electricity at the weekends."

Jarvis said energy supplies remained secure, but added that the best way to limit exposure to volatile global markets was to invest in the energy network and build a more secure and resilient system.

Ofgem said households could reduce bills by switching tariff, fixing their deal or changing payment method.

Moving from standard credit to direct debit could save customers around £143 a year, while some smart meter customers may be able to access lower-cost electricity deals at weekends.

The regulator urged anyone struggling with bills to contact their supplier as soon as possible, saying suppliers were required to support customers through measures such as tailored repayment plans, financial assistance and debt advice.

Reporting by Josh White for Sharecast.com.