Households will face the steepest summer rise in energy charges in four years after months of soaring market prices caused the government’s energy price cap for Great Britain to climb by 13%.
Under the cap the average gas and electricity bill will increase to the equivalent of £1,862 a year from July until the end of September to take account of the rise in global energy market prices caused by the war on Iran, up from £1,641 a year in April to June.
The energy secretary, Ed Miliband, said it was essential to de-escalate the conflict in the Middle East to bring oil and gas prices down.
“The rise in the price cap because of a war we did not choose is deeply unwelcome news for households across the country … The way to get bills down for good and avoid these price spikes is to go further and faster with this government’s drive for clean homegrown power we control,” he said.
The energy regulator for Great Britain, Ofgem, determines the maximum a supplier can charge for each unit of gas and electricity based on the cost of supplying energy to homes, including the average wholesale market costs in the months leading up to the start of each new cap. The cap also incorporates the maximum daily standing charge (flat fees levied for a connection regardless of how much energy people use).
Under the new energy price cap, households that pay via direct debit will see electricity charges rise from the current rate of 24.67p a kilowatt hour to 26.11p, while gas charges will rise from 5.74p a kWh to 7.33p.
The jump to £1,862 a year equates to a rise of £18 a month for the average household using electricity and gas, or £221 a year. It is the highest level for the cap since the first quarter of 2024, when it was £1,924. Back in 2022 the cap peaked at £4,279 in the first quarter of 2023 but bills were restricted to £2,500 a year, on average, by the government’s energy price guarantee.
Ofgem said it had updated its typical consumption values that the annual duel-fuel bill figure was based on, as households had used less energy during the past two milder winters, likely as a result of cost of living pressures as well as more efficient appliances. However, it said it had not changed the overall methodology used to calculate the cap.
The war in Iran has caused the biggest energy supply shock on record by choking exports of oil and gas from the Gulf. In Europe, gas prices have more than doubled from pre-crisis levels, and are about three times higher than before Russian gas exports to Europe halted after its invasion of Ukraine.
Tim Jarvis, Ofgem’s interim chief executive, told BBC Radio 4’s Today programme the rise in the cap was “almost entirely driven” by the rise in global gas prices resulting from the Middle East conflict.
While the rising cost of energy is expected to be painful for consumers this summer, the bigger concern is autumn and winter, when households typically use more energy.
Jarvis said the next quarterly change to the cap, due in October, would largely depend on how soon there was a peace deal in the Middle East and the strait of Hormuz reopened, and how quickly the market recovered.
“It is unfortunately now looking like a more long-term disruption to markets than we might originally have hoped,” he said.
Rising bills are expected to compound the record levels of energy debt amassed by households since Russia’s invasion of Ukraine ignited a gas supply crisis for Europe.
Unpaid energy bills reached a record high of £4.5bn earlier this year, according to the latest official data. These debts are partly paid down by other bill payers through an annual £52 charge included in the energy price cap.
Jarvis said people now had an opportunity to prepare for what may be coming in the winter, possibly by fixing their energy bills. That would protect customers if the cap rose again, at the risk of missing out on savings if prices fell. “It is likely that we are going to see elevated prices this winter. We’re not at the moment seeing the sort of price rises that we saw following the Russia-Ukraine war, but it remains a very uncertain situation,” he said.
