Household energy bills are set to reach a three-year high from October, as regulator Ofgem announces a 4% increase in its price cap.
Ofgem stated that the price cap will rise by 4% on October 1st, primarily due to higher wholesale gas prices influenced by the Iran war. For a household with typical gas and electricity consumption, this means an increase of £60 per year. However, over a third of households are on fixed tariffs, meaning their prices will remain unchanged.
The government highlighted that its reduction in VAT on electricity bills will save households £45 and reiterated its commitment to addressing cost of living pressures. Opposition parties, however, argued that the government is not doing enough.
The new cap comes into effect as colder weather approaches. Energy suppliers report a significant increase in energy debt and, anticipating persistently high bills, are calling for more support for struggling consumers.
Prime Minister Andy Burnham acknowledged the difficulty of the increase for consumers but pointed to his government's decision to cut VAT on electricity bills, effective from October. He also stated that the government would continue to explore long-term solutions for reducing energy prices.
In addition to the VAT cut, the government mentioned that the warm homes discount will provide £150 off bills for six million households this winter. However, analysts at Cornwall Insight forecast a potential further increase of 9% in domestic energy prices in the new year, raising concerns for households during the coldest months.
Shadow energy secretary Claire Coutinho urged the government to prioritize cheap energy, noting that despite promises to cut bills by £300, they have actually increased by nearly £400. Liberal Democrat spokesperson for energy and net zero, Pippa Heylings, called on Mr. Burnham to recognize the scale of the challenge and implement bold measures to lower bills. Reform UK treasury spokesperson Robert Jenrick warned of a difficult period ahead, attributing rising bills to Labour's "net zero ideology."
Former Prime Minister Gordon Brown suggested the government introduce a "machine gaming tax" to fund support for those struggling with bills and proposed a social tariff for energy. He expressed confidence that Mr. Burnham would consider such measures.
Neil Kenward, Ofgem's director general for markets, explained that while gas bills are rising by 8%, electricity bills are seeing a slight decrease due to the government's VAT cut. He noted that the difference between gas and electricity prices makes transitioning to heat pumps more cost-effective for households.
More Billpayers Have Fixed Tariffs
Approximately 35% of households, equating to 11 million, are on fixed tariffs. However, 22 million households in England, Wales, and Scotland are subject to the price cap.
Ofgem indicated that the price cap will increase by £60 annually, or £5 per month, to £1,723 for a typical household using both electricity and gas and paying by direct debit, assuming this level is maintained for a year. Mr. Kenward clarified that the technical increase is 3.6%, but Ofgem rounds it to 4% for public announcement. He also mentioned that fixed tariffs are available at savings of £100 or more compared to the October price cap.
The energy cap limits the price per unit of gas and electricity, not the total bill, which is determined by individual usage. Ofgem recently revised its estimate for "typical" energy use downwards, reflecting reduced consumption due to high prices and improved energy efficiency. The new estimates are 9,500 kWh of gas and 2,500 kWh of electricity per year.
Single mother Dana Lazarevic shared her strategy of coordinating washing times to take advantage of cheaper weekend energy rates. Although not facing extreme hardship, the cost of essentials has led her to limit certain activities for her children. She expressed concern about affording heating during the winter.
International Gas Prices Led to Rise
The increase in prices is attributed to wholesale costs, which constitute over a third of a domestic dual-fuel energy bill. According to Energy UK, the average gas price has been 61% higher over the past three months compared to late 2025. Households are still paying significantly more on average than before Russia's invasion of Ukraine in 2022, with bills approximately 70% higher than the pre-crisis norm.
This situation has led to a substantial rise in unpaid bills and charges, with Energy UK estimating total debt to have reached £6 billion, projected to increase to around £7 billion by year-end. The trade body advocates for a government-funded, taxation-supported flexible discounted tariff for those most in need, a proposal supported by many debt charities.
What to Do If You Need Help
Vanessa Northam, director at the debt charity StepChange, reported that an increasing number of individuals seeking assistance have high energy debt, averaging £2,600 in addition to other financial obligations. The charity supports the call for a government-introduced social tariff.
Her advice for those struggling as winter approaches includes:
- Assessing all household income and expenses.
- Monitoring energy usage closely and being aware of estimated bills, which may be inaccurate.
- Informing your energy supplier if you anticipate difficulty in paying.
- Seeking assistance through available online resources or by speaking directly with an advisor who can understand your specific situation.
Energy suppliers offer various support schemes for customers facing payment difficulties. Energy UK provides a list of these schemes, emphasizing that suppliers can often only assist if customers communicate their inability to pay.
