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- The price of gas and electricity will now increase during the colder winter months.
- The news is a blow to retirees who are already missing out on winter fuel payments.
Energy bills will rise by 10 per cent in October, regulator Ofgem has confirmed, or £149 more a year.
The average household currently pays energy bills of £1,568 a year, with prices capped by Ofgem’s price cap.
But this figure will rise to £1,717 from October 1, Ofgem said on Friday.
Rising energy bills are a blow to hundreds of thousands of pensioners, who will no longer receive Winter Fuel Payments worth up to £300 a year due to drastic cuts by Chancellor Rachel Reeves.
Energy bills are rising due to the increasing cost of wholesale energy – the gas and electricity that energy companies buy and then sell to consumers.
Frozen: Rising energy bills come as colder weather sets in and homes begin to need heating
The current price cap sets energy bills paid by more than 80 per cent of UK households, although the exact amount varies depending on gas and electricity usage.
The headline price cap figure applies to households with variable rate energy contracts who pay by direct debit.
The October average price cap will remain in place for three months until it is reinstated again in January 2025.
Can I overcome the price limit increase?
The only way to pay less on your energy bills is to use less gas and electricity or switch to a cheaper deal.
Fortunately, there are some fixed-rate deals that beat the October price cap by up to £125 a year, but these are rare.
A fixed-rate energy agreement, as the name suggests, restricts unit rates and fixed charges regardless of what happens to Ofgem’s price cap.
If the fixed rate is cheaper than the one likely to come into effect in October (although many are not), households will save money on their energy bills.
Uswitch’s director of regulation, Richard Neudegg, said: ‘The news of a 10 per cent rise in energy tariffs from October is a stark reminder of how quickly the energy market can reverse course.
‘The good news is that households do not have to endure the uncertainty of rising bills as there are currently fixed deals available that are cheaper than the new price cap.
‘The cheapest 12-month fixed tariff, for the average household, is currently £1,592, representing an annualised saving of £125 compared to the October price cap and offering protection against another potential rise in January.’
Why is Ofgem’s price cap so important?
The price cap was introduced in January 2019 to prevent energy companies from overcharging customers on variable tariffs.
At that time, most households had fixed-rate energy contracts and only switched to variable rates if they did not renew at the end of their term.
But after energy bills began to rise in late 2021, gas and electricity companies responded by removing all new fixed-rate offers from the market.
They did this to try to avoid the widespread collapse that affected many energy companies, which were suddenly forced to sell energy for much less than it cost them to buy it.
With cheap fixed-rate deals virtually gone, almost all households ended up on variable tariffs regulated by Ofgem’s price cap.
What will happen to energy bills in 2025?
Ofgem never makes predictions about the future of its price cap.
But unfortunately, it seems the only way up.
Analysts at Cornwall Insight said there would be a “modest further increase” in energy bills when the price cap changes again in January 2025.
Cornwall Insight has correctly predicted the direction of all price cap changes since energy prices became volatile in late 2021.