Energy bills to jump 13% from July as Ofgem lifts price cap to £1,862

Millions of households face higher energy costs this summer after Ofgem confirmed the price cap will rise by 13% from 1 July. The increase pushes the typical annual bill for a dual-fuel customer paying by direct debit to £1,862, an extra £221 over the course of a year, or roughly £18 a month.

The cap sets a limit on the rates suppliers can charge per unit of gas and electricity, rather than a cap on total spending, so households that use more will pay more. It applies for the three months to the end of September before being reset again for the autumn.

The rise lands at an awkward moment for households already contending with elevated mortgage costs and stubborn food prices, and it threatens to nudge headline inflation higher just as it had begun to ease. For the poorest families, where energy makes up a larger share of spending, the increase will bite hardest.

Wholesale prices blamed

Ofgem attributed the rise largely to a jump in wholesale gas prices on international markets, which it linked to the conflict in the Middle East. Gas costs feed through to electricity prices as well, leaving few households insulated from the increase unless they are locked into a fixed deal.

Wholesale costs make up the single biggest element of a typical bill, so even short-lived spikes in global markets can translate into higher caps. Because Ofgem sets the cap by looking back over an observation window of market prices, the increases seen in the spring are only now reaching consumers.

“Today's price change reflects continued volatility in global energy markets.”

— Tim Jarvis, chief executive of Ofgem

The remainder of the bill is made up of network charges for maintaining pipes and wires, policy costs that fund social and environmental schemes, supplier operating costs and a small profit margin. While those elements move more slowly, it is the wholesale component that drives the headline-grabbing swings.

Because Britain relies heavily on imported gas and uses it both to heat homes and to generate a significant slice of its electricity, the country is unusually exposed when international prices climb. Efforts to reduce that dependence, through renewables, nuclear and improved insulation, are well under way, but they take years to deliver and offer little immediate protection from sudden price shocks.

What it means for households

For a typical household, the change works out at around £18 a month, though the actual impact varies widely depending on consumption, home insulation and payment method. Customers who pay on receipt of a bill, or via prepayment meters, face slightly different rates under the cap.

Consumer groups urged households to take practical steps to soften the blow and to seek help if they are struggling. Among the measures worth considering:

• Submitting regular meter readings so bills reflect actual rather than estimated usage
• Reviewing whether a fixed tariff offers better value than the variable cap
• Checking eligibility for support schemes, grants and supplier hardship funds
• Spreading costs evenly across the year through a direct debit arrangement
• Improving energy efficiency at home, from draught-proofing to smarter heating controls

Charities warned that a growing number of households are falling into energy debt, with arrears building over successive winters. They called for targeted support for vulnerable customers rather than blanket subsidies that are costly to the taxpayer.

Fixed deals offer shelter

The regulator pointed out that a large share of accounts are now on fixed tariffs and will be shielded from the change. It urged customers worried about affordability to contact their supplier, and reminded those on standard variable tariffs that shopping around for a competitive fixed deal could soften the blow.

“Households on a competitive fixed deal are largely insulated from this increase, which is why it pays to review the market.”

— An energy market analyst

Background

The price cap was introduced in 2019 to protect customers who do not switch supplier from being overcharged on default tariffs. It rose to unprecedented levels during the energy crisis that followed the disruption to global gas supplies in 2022, before easing as wholesale prices fell back. The latest increase shows how exposed the UK remains to geopolitical events far from its shores.

What happens next

The cap will be reviewed again ahead of October, the point at which colder weather drives consumption sharply higher. Much will depend on the trajectory of the Middle East conflict and its effect on global gas markets. Analysts said that if tensions ease, autumn bills could stabilise, but warned that a further escalation could push the cap higher just as winter demand peaks.