Pedestrians shelter from the rain beneath umbrellas while walking past the London landmark, the London Eye, from Embankment by the River Thames, in central London, on August 18, 2023 on a gloomy summer's day. Photo by HENRY NICHOLLS / AFP
UK energy bills are set to fall from October though millions of households could still face higher costs in the coming months, following the phase-out of government support.
The national price cap will drop 7.3% to £1,923 for the last three months of the year, from £2,074 previously, regulator Ofgem said Friday. The pricing mechanism, set on a quarterly basis, limits how much suppliers can charge per unit of energy.
Still, as many as 7.2 million households in England could face higher energy bills this winter, with some paying £100 more, the Resolution Foundation said in a study this week.
Britain remains in the midst of an historic cost-of-living crisis, with consumers having to pay more for everything from food to fuel housing costs. While inflation has eased from the highest level in decades, it’s still stubbornly elevated. The Bank of England’s chief economist recently warned that rising energy costs could derail efforts to keep overall prices in check.
Ofgem’s cap is meant to shield consumers from market volatility, but it effectively became the UK’s universal energy rate last year, after Russia’s invasion of Ukraine and curtailment of gas supplies triggered a supply crunch.
Last winter, the typical annual residential energy bill was around £2,100, as the government’s Energy Price Guarantee and £400 rebates benefited consumers, according to the Resolution Foundation. Now that the supply crisis has receded, government aid has been significantly scaled back.
Consumer charity Citizen’s Advice is calling on the government to do more to help people from falling into fuel poverty, such as expanding the support that lower-income households are eligible for, like the Warm Home Discount. The group says record numbers of people are seeking help from energy debt, which is now more than £1,700 - a third higher than it was in 2019.
For now, lower wholesale energy costs are enabling providers to offer more fixed tariffs for their power bills, allowing some consumers to lock in rates. But prices typically rise during the winter, and gas futures for February are now more than 50% more than the level for October, the start of the heating season. Ofgem’s price cap is also expected to rise again at the start of the year.
"While a small decrease in October’s bills is to be welcomed, we once again see energy price forecasts far above pre-crisis levels, underscoring the limitations of the price cap as a tool for supporting households with their energy bills,” said Craig Lowrey, principal consultant at Cornwall Insight.
