The Ofgem energy price cap rise of 4% will push the average annual household bill to £1,723 from 1 October, up from the current £1,663, according to Ofgem. The regulator said the increase, worth £60 a year or £5 a month for a typical household using both gas and electricity, has been driven by higher wholesale gas prices linked to the ongoing conflict in the Middle East.
Prime Minister Andy Burnham acknowledged the pressure on households, saying: ‘It’s difficult for people and I recognise that. But it’s why, within days of taking office, I announced that we would remove VAT off electricity bills to give people that little bit of help.’ He added that the Government would ‘continue to look as we go forward at how we get energy prices down in the long term’.
What the Ofgem energy price cap rise means in practice
Not every household will feel this increase. Ofgem confirmed that around 35% of households, roughly 11 million, are on fixed tariffs and will not be affected by the cap change. For those on variable tariffs, the cap sets an upper limit on the unit rate suppliers can charge, not a fixed bill, so actual costs depend on how much energy a home uses.
Neil Kenward, Ofgem’s director-general for markets, pointed out that fixed tariffs are currently available at £100 or more below the October price cap level. He also noted that many suppliers offer cheaper electricity rates to smart meter customers who use energy outside peak hours, and that prepayment customers pay the lowest cap rates, potentially saving an average of about £45 compared to paying by direct debit.
Ofgem also offered some wider context: current prices remain 52% below the height of the 2022 energy crisis, when the government stepped in to limit bills at £2,500. That comparison may offer little comfort to households already struggling, but it does illustrate how far the market has shifted since its worst point.
A further 9% rise forecast for January
The October increase may not be the last. Analysts at Cornwall Insight released their latest forecast on the same day, predicting a further 9% rise to the price cap in the new year. That would push the average annual bill to £1,872 from January, an increase of £149 on October’s level. Global energy markets, described as volatile and heavily influenced by geopolitical events, remain the dominant factor behind these movements.
Energy Secretary Miatta Fahnbulleh said families would be ‘understandably concerned’ and pointed to the removal of VAT on electricity bills from October as a measure to ‘give families some breathing space’. She also referenced £150 in costs removed from bills earlier in the year, though she acknowledged that further action would be kept under review.
Consumer groups call for bolder action
Citizens Advice chief executive Dame Clare Moriarty described the rise as ‘another sign of the relentless erosion of living standards across the country’. She said energy bills are ‘simply too high’, with prices outpacing incomes and debt levels continuing to grow. Citizens Advice is calling on the Government to fund a reformed energy support scheme targeted at those most at risk, including single-parent families and disabled people.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, noted that every unit of gas used this winter will cost significantly more than last year and more than 150% more than at the end of 2020. He said that cutting VAT on electricity and extending the warm home discount were ‘a start’, but called on ministers to ‘go further and faster’.
From the opposition, shadow energy secretary Claire Coutinho said Labour had promised to cut bills by £300 but they had instead risen by nearly £400. She outlined an alternative approach centred on scrapping Government taxes and levies on bills.
Ned Hammond of Energy UK said the increase intensifies challenges for customers already struggling, and argued that the conflict’s effect on gas prices ‘underlines why we need to move to using more of our own sources of clean energy’. The October cap will remain in place for three months, covering the period when heating use typically rises most sharply.
