UK household energy bills will rise by 10% from 1 October due to severe weather events and geopolitical instability.
British energy regulator Ofgem raised the price cap on household energy bills by 10% from the current level, which has been in place since July, to £1,717 ($2,250) a year. This is the first time Ofgem has raised the price cap since January 2023, when it hit a record high of £4,279. The government had since worked to protect consumers from the brunt of the price hike, limiting annual bills to £2,500 for a typical household.
The new cap, which will be in place from 1 October until 31 December, is £117 cheaper than it was in the same period last year.
The regulator cited extreme weather and geopolitical events, such as the war in Ukraine, which have caused wholesale gas prices to increase.
Ofgem CEO Jonathan Brearley said: “Ultimately, the price rise we are announcing today is driven by our reliance on a volatile global gas market that is too easily influenced by unforeseen international events and the actions of aggressive states.”
“We know that this rise in the price cap is going to be extremely difficult for many households.”
Households may struggle to cope with the recent hike, pushing them further into debt. According to Ofgem’s latest figures, bad debts have risen to a record £3.1bn and are unlikely to be recovered.
The price rise is more than what analysts expected. On 19 August, energy consultancy Cornwall Insight told Reuters that it was expecting the cap to rise by just 9% due to an increase in wholesale gas and electricity prices, which have “stabilised somewhat compared to the previous two years” but “has not fully recovered from the energy crisis and the impact of Russia's invasion of Ukraine”.
Early this year, bank ING said that European gas prices were trending higher due to storage capacity being lower than seasonal averages.
UK Energy Secretary Ed Miliband said: “The rise in the price cap is a direct result of the failed energy policy we inherited, which has left our country at the mercy of international gas markets controlled by dictators. The only solution to get bills down and greater energy independence is the government’s mission for clean, homegrown power.”
