Average Household Bill to Increase by £94 From January

File photo of an online energy bill, dated Feb. 3, 2022. Jacob King /PA Media

The average household bill will rise to £1,928 a year from January 2024, Ofgem said on Thursday.

It’s £94 up from the current cap of £1,834 and similar to the level between April and October last year.

The increase is “driven almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine,” Ofgem said.

The headline price cap for customers paying by direct debit, revised every three months, is not the maximum amount suppliers can charge in total. The amount is calculated based on the estimation that the typical household in Britain uses 2,700 kilowatt hour (kwh) of electricity and 11,500 kwh of gas in a year.

The actual bill sizes vary depending on where a household is and how much energy is consumed.

Jonathan Brearley, CEO of Ofgem said the regulator has “made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.”

“We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around with a range of tariffs now available, offering the security of a fixed rate or a more flexible deal that tracks below the price cap,” he said.

Prepayment Meters

Prepayment meter customers, who have historically been paying more because of the higher costs for suppliers to serve them, is currently subsidised by the government through the Energy Price Guarantee scheme, which covers their extra costs.

The government said the discount saved them around £21 per year between June and September, and around £40 per year since October because of a change in how the discount is delivered.

However, the Energy Price Guarantee scheme is due to end on March 31 next year.

Ofgem has published a consultation on Thursday on plans to level the standing charges from April 2024 so the extra cost would be shared by direct debit customers.

It will be followed by a second phase of levelisation from Oct. 2024, when the debt-related costs between standard credit customers and direct debit customers will also be levelled.

Ofgem previously said that respondents from its Call for Evidence published in April broadly supported the introduction of a levelisation process.

Prepayment metre customers are more likely to have lower income and have vulnerabilities, such as disability or illness, compared to direct debit customers.

Some indebted customers had prepayment metres forcibly installed, sometimes with debt collectors and locksmiths breaking into their homes, armed with court warrants.

Ofgem’s energy price cap is designed to limit the profit energy suppliers are allowed to charge and is primarily calculated based on the costs to supply energy.

It was initially reviewed every six months, but Ofgem had to change the interval to three months last year owning to volatile wholesale prices.

It came after an array of smaller energy suppliers went bust in 2021 as wholesale prices shot up because the demand and supply of energy were thrown off-balance by COVID-19 lockdowns. The supply shortage was also compounded by Russia’s invasion of Ukraine, which further drove up global energy prices.

Ofgem energy price cap for average households paying with direct debit. The Epoch Times

The price cap increased by 235 percent in nine months, from £1,277 at the beginning of last year to a peak of £4,279 in the first quarter of this year, although the worst direct impact on households was cushioned by the government’s energy price guarantee.

The package, funded by public borrowing, limited a typical household bill to £2,500 per year and filled the gap between that and the Ofgem Cap.

A £400 payment was also given to households, effectively limiting the bill to £2,100.

The £2,500 guarantee has ended as of July 1 but the policy will remain in place until March 31 next year to cover bills in case they jump back up to over £3,000.

The cap for the period between Oct. 1 and Dec. 31 was initially calculated to be £1,923, based on the previous usage estimate of 2,900 kwh of electricity and 12,000 kWh of gas. It was revised down to £1,834 with new lower estimates of typical energy usage.