The energy price cap is expected to rise by around 1% on 1 January 2024, according to predictions from energy consultancy Cornwall Insight, after gas prices in Europe went up again1. The forecast follows Ofgem's announcement on 25 August 2023 that the cap would fall by around 7% from 1 October 2023, taking the typical household bill for gas and electricity to around £1,923 a year, or about £160 a month1.
The 1 October rates apply to variable, out-of-contract tariffs, not fixed deals, and run until 31 December 20231. From 1 October the average unit rates were around 6.89p per kWh for gas and 27.35p per kWh for electricity, with average daily standing charges of 29.6p for gas and 53.4p for electricity1. Standing charges alone amount to more than £25 a month for a household using both fuels, before any energy is used1. Prepayment customers pay slightly more, by around £25 over the year, and Ofgem has said it is seeking to permanently end the prepayment premium1. Households paying by cash or cheque on receipt of bills pay rates 6.7% higher than direct debit customers1.
The End Fuel Poverty Coalition's records of Ofgem and government data put the 1 October 2023 cap at 6.89p per kWh for gas and 27.35p for electricity, with standing charges of 29.62p and 53.37p respectively2. Compared with winter 2020/21, daily gas standing charges are up 8% and electricity standing charges up 119%2. Its figures show standard credit customers pay gas standing charges 18% higher, electricity standing charges 13% higher and unit costs around 5% higher than direct debit customers2. Ofgem changed the rules on supplier profits so that suppliers are likely to earn 2.4% profit on every average customer's bill from 1 October, up from 1.9%2.
The coalition's price cap history table records the 1 October 2023 cap at £1,923 for an average annual household bill, a fall of £151 or 7.28% from the previous period, and forecasts 1 January 2024 at £1,932, a rise of £9.24 or 0.48%2. It notes that figures from 1 January 2024 use a new "average household" usage calculation, and that using the old estimates would indicate more significant increases through 20242. Cornwall Insight also expects the cap to fall slightly in April and July 2024 but to remain higher than the October 2023 rates1.
"But gas prices in Europe have gone up again more recently. So in January 2024, the price cap is expected to rise again by around 1%, according to energy consultancy Cornwall Insight's predictions."
Why it matters for households
The cap sets the maximum a supplier can charge for each unit of gas and electricity and for the daily standing charge on a default tariff, so a rise in January feeds directly into what a home pays for the energy it uses. Because standing charges are fixed daily amounts, they are incurred whether or not a household uses much energy, which limits how far a home can reduce its bill through lower usage alone. The gap between payment methods matters too: the same household can face different rates depending on whether it pays by direct debit, on receipt of bills, or by prepayment meter1.
For a home's energy independence, the figures show how much of the bill sits outside the household's control. Wholesale gas prices, the level of the cap and the standing charge are set by factors beyond the meter, while the share of the bill a household can influence is the units it consumes. It found 32% of smart meter customers with a prepayment setting and 27% of those on traditional prepayment meters live in cold damp homes, against 22% of standard credit customers and 11% of direct debit customers3. London had the highest share at 23%, followed by Yorkshire and Humber at 22%, the West Midlands at 18% and the North West at 17%3.
What happens next
The rates announced on 25 August 2023 apply from 1 October to 31 December 20231. The next cap level takes effect on 1 January 2024, with Cornwall Insight predicting a rise of around 1%1. Further changes are expected in April and July 2024, with predictions of slight falls that would still leave rates above the October 2023 level1. The coalition reports that petitions with over 800,000 signatures have been handed to the Prime Minister calling for action to bring down bills, end energy debt and address cold damp homes3.
Sources3 cited
- Energy prices are changing: here's what it means for you - Which?, which.co.uk
- Ofgem price cap change sets sky high energy bills for winter, endfuelpoverty.org.uk
- Millions spending winter in cold damp homes, endfuelpoverty.org.uk