Ofgem confirmed on 23 November 2023 that the energy price cap on variable tariffs would rise by 5% from 1 January 2024, following a reduction in the previous quarter1. The increase takes a typical annual energy bill from £1,834 to £1,928, a rise of £943. Which? put the monthly effect at £7.83, describing the new figure as around £161 a month against just under £153 now1.
The cap sets the maximum a supplier can charge per unit of energy and for the daily standing charge on default tariffs, and covers roughly 29 million households4. It is not a limit on a household's total bill: a household using more than the "medium" consumption Ofgem uses for its headline figure, 11,500kWh of gas and 2,700kWh of electricity a year, will pay more1. The typical household figure is an average, not a ceiling, and the full guide to energy bills and the price cap sets out how the mechanism works.
For the quarter from 1 January to 31 March 2024, the rates for a typical direct debit customer are:
| Item | Rate from 1 January 2024 |
|---|---|
| Electricity unit rate | 28.62p per kWh3 |
| Electricity standing charge | 53.35p per day3 |
| Gas unit rate | 7.42p per kWh3 |
| Gas standing charge | 29.60p per day3 |
Customers on prepayment meters or paying by cash or cheque face a higher cap, at £1,960 and £2,058 respectively3. Which? reported that direct debit and pay-as-you-go customers pay a similar amount, but that prepayment customers were expected to see an increase in March 2024 when current protections end1. Scope put the rise at 5.7% on the previous quarter, against a cap of £1,823 for October to December 20235.
Ofgem attributed the increase "almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine"1. Which? reported that wholesale prices had also been affected by disruptions to supply from Finland, the Israel-Hamas conflict and strikes at gas production works in Australia, according to the consultancy Cornwall Insight1.
"From 1 January 2024, Ofgem have confirmed that the average household's energy bill will increase by 5% (or £94 a year) from current prices."
The End Fuel Poverty Coalition said the Government had refused proposals for an Emergency Energy Tariff and ruled out a "help to repay" scheme for people in energy debt6. The British Gas Energy Trust reported that the UK was in just under £3 billion of energy debt4. The Warm This Winter campaign said people struggling to pay energy costs needed £73 a month off their bills on average to keep warm, rising to £77 for those not working7. The End Fuel Poverty Coalition said seven million households were already in fuel poverty, with an additional 1.6 million expected by April 20243.
Why it matters for households
The cap governs what a supplier can charge for each unit and each day of standing charge, so a rise feeds directly into the cost of every kilowatt hour a home uses and every day it is connected, whether or not the heating is on. Standing charges are paid regardless of consumption, and the End Fuel Poverty Coalition reported that daily standing charges rose 5% for gas and 14% for electricity compared with the previous year, with standing charges up 8% for gas and 119% for electricity against pre-crisis levels6. Ofgem was consulting on how the standing charge could be changed in future1.
For a household's energy independence, the cap changes the price of grid-supplied gas and electricity but not the amount of energy a home needs. The Warm This Winter coalition reported that 39% of UK households said they could not afford to insulate their homes, and that the Great British Insulation Scheme installed just over 1,000 energy efficiency measures between March and October 20238. It said upgrading inefficient homes to EPC band C would collectively save consumers £24 billion on energy bills by 2030 and lower the amount of gas required to heat homes8. The history of price cap levels and announcement dates and the record of domestic energy prices over time show where the current level sits.
The £400 government payment made to all households the previous winter was not repeated3. The British Gas Energy Trust said its Energy Support Fund can provide grants up to £2,000 for British Gas customers, and its Individuals and Families Fund grants up to £2,000 for British Gas and non-British Gas customers4. Scope called for the Energy Price Guarantee to be extended for disabled households beyond March 2024 until a social tariff is introduced5.
What happens next
The cap is reviewed and set every three months4. From 1 April 2024 the cap is due to change again, with Ofgem to confirm the new details in February4. Cornwall Insight expected the cap to drop slightly for April to June 2024, drop again for July to September, and then increase again for next winter, with January to March the priciest three months of 20241. Electricity standing charges were predicted to increase by around 8p per day from April 2024, and Ofgem predicted that around 1.2 million low-income households would be worse off after that change1.
Sources8 cited
- Energy prices are rising by 5% in January: find out how much more you'll pay - Which?, which.co.uk
- Energy price cap increase: what it means for electric car running costs - Which?, which.co.uk
- Navigating the Energy Price Cap: what it means for you - Low Carbon Hub, lowcarbonhub.org
- UK energy debt at just under £3 billion - British Gas Energy Trust, britishgasenergytrust.org.uk
- Extra burden of energy among disabled households | Disability charity Scope UK, scope.org.uk
- Energy bills up in January as public blame Government for crisis, endfuelpoverty.org.uk
- Struggling households need £73 a month off energy bills to keep warm this winter, endfuelpoverty.org.uk
- Public priced out of essential warm home measures, endfuelpoverty.org.uk