Ofgem was due to release the actual level of the energy price cap for 1 October to 31 December 2024 at 7am on Friday 23 August, according to the Energy and Climate Intelligence Unit1. The announcement follows predictions from the energy consultancy Cornwall Insight that the cap would rise for a typical household2.
Cornwall Insight estimated on 19 August that the cap would rise to £1,714 per year for the typical dual fuel home, around 10 per cent or £150 higher than the previous quarter1. Energy UK, in a paper published on 22 July, put the likely increase at around 10 per cent, from £1,568 to £1,723.063. The two figures differ: Cornwall Insight's estimate is £1,714, Energy UK's is £1,723.06. National Energy Action said Cornwall Insight had predicted average yearly bills would increase by approximately £1502.
The cap figure is not a limit on a household's total bill. It caps the unit rates and standing charges a supplier can charge for default tariffs, so what a home pays depends on how much energy it uses. The price cap rates by payment method differ between direct debit, prepayment and standard credit, and the history of every cap level and announcement date sets each figure in context.
Debt and support formed the backdrop to the announcement. Energy UK said Ofgem had put overall domestic customer debt at £3.32 billion, which it described as likely to be a significant underestimate, and that average debt where no payment plan is in place stood at £1,452 for electricity and £1,264 for gas in the first quarter of 2024, annual increases of 19 per cent and 31 per cent respectively3. National Energy Action said energy debt was at record levels, with customers owing over £3 billion, and that hundreds of thousands of pensioners now miss out on the Winter Fuel Payment after changes mean only those on means-tested benefits can claim2.
"If these alarming estimates are confirmed by Ofgem on Friday, energy bills and energy debt will stretch household finances beyond breaking point."
The End Fuel Poverty Coalition used the run-up to the announcement to press for regulatory change, saying six recommendations from its Warm This Winter Tariff Watch reports had been implemented by Ofgem while a further nine had not4. Among the unaddressed items, it said, were a cap on exit fees, which have risen by 345 per cent in three years, and a shift of costs from standing charges to unit rates. It said standing charge reforms could cut annual charges by £152.06, from £334.08 a year to £183.024. It also said a snapshot taken in April 2024 found 76 per cent of fixed tariffs had annual costs above the Ofgem price cap, and that around three million UK households had opted for fixed tariffs, the majority with exit fees of more than £1004. The choice between a fixed tariff and staying on the cap turns on those exit terms.
Why it matters for households
A higher cap from 1 October raises the unit rates and standing charges that default tariff customers pay, and the increase lands as heating use begins to climb. The Energy and Climate Intelligence Unit said bills under the cap this winter were estimated to be 50 per cent higher, or around £550, than the pre-crisis average taken between 2018 and 20211. Energy UK said prices remained some 50 per cent higher in nominal terms, 25 per cent when adjusting for inflation, than pre-crisis levels3.
For a household's energy independence, the cap level sets the price of the gas and electricity a home buys rather than how much of it a home avoids buying. The Energy and Climate Intelligence Unit said a lack of progress on energy efficiency and heat pumps meant reliance on gas had not fallen much, and that oil and gas from the North Sea is sold on international markets to the highest bidder, so does not help with bills or energy independence1. Energy UK said policy costs on bills account for almost £200 (£188) per typical household per year, with the Renewables Obligation adding £86 on electricity and Feed-in Tariffs £213. Households wanting to check whether the cap applies to them can read do I need to do anything to be covered by the price cap, and those whose bills exceed the headline figure can read why is my bill higher than the cap. The cap does not apply in Northern Ireland, where separate arrangements operate.
What happens next
National Energy Action said it would publish figures on the number of UK households in fuel poverty on the evening of Thursday 22 August, under embargo until Ofgem confirmed the cap on Friday2. Energy UK said the trend was for cap rates to hold at around the higher number3. The End Fuel Poverty Coalition said it remained unclear what specific actions Ofgem was taking on several of its recommendations, including investment by distribution network operators and the management of gas network decommissioning costs4.
Sources4 cited
- Energy & Climate Intelligence Unit | Ofgem energy price cap for…, eciu.net
- Price cap predicted to rise: Charity warns households ‘will go into winter with less support and higher energy bills’ - National Energy Action (NEA), nea.org.uk
- Policy solutions: Taking immediate action to make bills affordable this winter - Energy UK, energy-uk.org.uk
- Ministers urged to review nine nightmare energy rules, endfuelpoverty.org.uk