Energy price cap to rise 5% in January 2024

Energy bills are set to rise again from January as Ofgem, the energy regulator, responds to rising wholesale electricity and gas prices.

Average bills will rise by £94 from January, an increase of 5%. So, customers will see annual bills go up from an average of £1,834 to £1,928, although individual bills will vary.

Ofgem claims it is determined to help those who need support and has announced proposals to equalise standing charges and end the so-called premium suffered by customers on prepayment meters.

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Rising bills

The energy price cap, updated every quarter, sets the maximum amount energy companies can charge customers on their bills. It is set according to the wholesale price of gas and electricity, the cost of supplying energy to the network, and VAT.

From January 1st 2024, the unit rate for a typical user paying by direct debit will be 29p/kWh for electricity and 7p/kWh for gas. The average standing charge will be 53p per day for electricity and 30p per day for gas.

Ofgem says these changes come due to an increase in the price of wholesale oil and gas caused by world events such as the conflict in the Middle East.

"This is a difficult time for many people, and any increase in bills will be worrying," said Jonathan Brearley, CEO of Ofgem, "but this rise - around the levels we saw in August - is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay."

Help for households

With many people struggling to pay their bills, Ofgem has also announced proposals to end the premium paid by customers on prepayment meters. Standing charges for these are typically higher reflecting the additional cost of supplying electricity to these homes.

The plans aim to share the cost of bad debt more evenly across all customers. Under the plans, prepayment customers would save around £50 per year, standard credit bills would fall by around £45 per year but direct debit customers could see around £20 added to their bills.

Ofgem also recently set out new rules for suppliers making sure they make it easier for vulnerable customers and provide proactive support for anyone struggling to pay their bills.

"It is important that customers are supported and we have made clear to suppliers that we expect them to identify and help those who are struggling with bills," added Brearley.

There is, though, some good news. Brearley added that "choice is returning to the market". This, he said, was a "positive sign and customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap."

By shopping around, then, customers may soon be able to find better deals to take control of energy costs.