Household energy bills are set to reach a three-year high in 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. This means a household with typical gas and electricity consumption will see their annual bill increase by £60. However, over a third of households are on fixed tariffs, so their prices will remain unaffected.
The government highlighted that its reduction in VAT on electricity bills will save households £45 and that it is implementing further measures to address the cost of living crisis. Opposition parties, however, argue that the government is not doing enough.
The new cap comes into effect as colder weather approaches in October. Energy suppliers report a significant increase in energy debt and, anticipating persistently high bills, are calling for more support for consumers struggling to pay.
Prime Minister Andy Burnham acknowledged that the increase would be "difficult" for consumers but pointed to his government's decision to cut VAT on electricity bills, which will provide relief from October. He added that the government would "continue to look... at how we get energy prices down in the long term."
In addition to the VAT cut, the government confirmed that the warm homes discount will provide £150 off winter bills for six million households. However, analysts at Cornwall Insight forecast that domestic energy prices could rise by a further 9% in the new year, potentially causing further concern for households during the coldest months.
Shadow energy secretary Claire Coutinho urged the government to "put cheap energy first," stating 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 Burnham to "wake up to the scale of the challenge" and implement bold measures to lower bills. Reform UK treasury spokesperson Robert Jenrick warned of a "difficult period ahead" and blamed Labour's "net zero ideology" for rising bills.
Former Prime Minister Gordon Brown suggested the government should introduce a "machine gaming tax" and use the proceeds to assist those struggling with bills. He also proposed that Burnham consider a social tariff for energy, expressing confidence that Burnham would support such measures.
Neil Kenward, Ofgem's director general for markets, explained that while gas bills are increasing 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 a more cost-effective option for households.
Approximately 35% of households, or 11 million, are on fixed tariffs. However, 22 million households in England, Wales, and Scotland are subject to the price cap. Ofgem estimates the annual increase for a typical household paying by direct debit will be £60, or £5 per month, bringing the total to £1,723 if sustained for a year.
Kenward clarified that the actual increase is 3.6%, but Ofgem rounds the figure to 4% for public announcement. He also mentioned that savings of £100 or more are available by opting for a fixed tariff.
The energy cap limits the price per unit of gas and electricity, not the total bill, which ultimately depends on individual usage. Ofgem recently revised its estimate for "typical" energy use downwards, reflecting reduced consumption due to high prices and improved energy efficiency in many homes. The new estimate is 9,500 kWh of gas and 2,500 kWh of electricity annually.
Single mother Dana Lazarevic shared her experience of carefully timing household chores, like washing, to take advantage of cheaper energy rates on weekends. Although she is not in severe financial distress, the rising cost of essentials forces her to limit certain activities for her children. "When winter comes and the cold bites, you need to put on the heating and need to have the money to pay for it," she said.
The rise in energy prices is attributed to wholesale costs, which constitute just 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 full-scale invasion of Ukraine in 2022, which triggered the energy crisis. Industry data indicates that bills have increased by approximately 70% compared to the pre-crisis norm.
Consequently, unpaid bills and charges have surged. Energy UK estimates that total energy debt has collectively risen to £6 billion, with projections suggesting it could reach £7 billion by the end of the year. The trade body advocates for a government-funded, taxation-based "flexible discounted tariff" for those most in need, a proposal supported by numerous debt charities.
Vanessa Northam, director at the debt charity StepChange, reported that an increasing number of individuals seeking assistance have substantial energy debt, averaging £2,600 on top of 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 expenditure.
- Monitoring energy usage closely and being aware of potentially inaccurate estimated bills.
- Informing the energy supplier if difficulties in payment are anticipated.
- Seeking advice from individuals who can fully understand the situation, rather than relying solely on online information.
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 proactively inform them of their inability to pay.
