Energy costs expected to rise under new price cap

Ofgem, the UK's energy regulator, is set to announce the latest energy price cap. It is anticipated that gas and electricity costs for British households will rise again in April. This price cap aims to limit the amount energy suppliers can charge per unit of energy, impacting the bills of 26 million households across England, Wales, and Scotland.

Analysts predict that energy prices will increase by approximately 5% due to rising wholesale costs for energy suppliers. This price hike coincides with increases in water bills and council tax, although average wages are also rising. Affected are households on default or variable tariffs, with Ofgem setting the price cap every three months. The new price cap will take effect and be announced at 7 am Greenwich Mean Time on April 1st.

While the cost per unit of gas and electricity is capped, the total bill amount is not. Consequently, household bills will vary depending on energy usage. The regulator typically illustrates the impact of the price cap by showing the annual bill change for a household with typical energy consumption. Analysts at consultancy Cornwall Insight predict that a typical dual-fuel household's annual bill will increase by £85 from April, reaching £1,823 per year. They believe the predicted increase is due to a combination of cold weather across Europe and declining gas storage levels, which have led to a sharp rise in wholesale prices.

If the price cap increase is confirmed, it will be the third consecutive rise in energy bills, prompting further calls for consumers to shop around for better deals and for government intervention to help struggling bill payers. Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: "The burden of high energy bills has lasted for far too long and households will continue to be at the mercy of global markets and the fossil fuel industry for as long as our energy bills are linked to the cost of gas. As well as moving away from gas, it is vital that support is provided to vulnerable households currently struggling with energy costs and investment is made in improving the energy efficiency of homes."

The period of high prices means households collectively owe energy suppliers £3.8 billion in debt. On average, each household in arrears owes over £1,500 for electricity and over £1,300 for gas. Current bill prices are approximately 50% higher than pre-pandemic levels, but still below the peak reached in 2022 when Russia's full-scale invasion of Ukraine caused energy prices to soar. Furthermore, the regulator recently unveiled new charging schemes allowing users to opt for different charging methods, shifting fixed fees to other parts of the bill, but these plans were immediately met with strong opposition.

Experts shared three tips for controlling energy use during the warmer months: if the hot water is too hot to wash your hands, the water heater is set too high and should be turned down; pay attention to ventilation in the house, such as blocking unused chimneys with black plastic bags filled with crumpled paper, or restricting other vents around the house; limit showers to four minutes. The charity WaterAid has compiled a playlist of four-minute songs to help you keep track of time.