Ofgem price cap rises 4% to £1,723 for typical household

The cap covers households in England, Scotland and Wales on default tariffs and is reviewed every three months. The January figure is not final and forecasts could move before Ofgem announces the next cap. The government has temporarily removed the 5% VAT from electricity bills until 31 March next year; it estimates the cut saves around £45 a year, while households still pay 5% VAT on gas.

What changed on 1 October

Ofgem set the cap for 1 October to 31 December at £1,723 a year for a typical dual-fuel home paying by direct debit. That is up £60, or 4%, from £1,663. The gas unit rate rose 8.7%, from 7.33p to 7.97p per kWh, and the gas standing charge went from 29.04p to 29.68p a day.

Electricity barely moved: 26.11p to 26.32p per kWh, while its standing charge fell 4.1% to 54.83p a day. The cap assumes 2,500 kWh of electricity and 9,500 kWh of gas a year. Suppliers on standard variable tariffs passed the new rates on from 1 October. The cap limits unit rates and daily standing charges, not the total bill.

January forecasts

Cornwall Insight's forecast of 30 September put the cap at £1,999 a year from 1 January, up £276, or 16%, on October to December levels. The consultancy described it as the largest rise since January 2023. Supplier forecasts run higher, from about £2,065 to £2,115, LondonLovesBusiness reported.

Cornwall Insight links the increase to the Middle East conflict, which disrupted gas supplies after the Strait of Hormuz was effectively closed when the Iran war began in February. The cap follows wholesale prices with a lag. Ofgem's window for the January cap runs from mid-August to mid-November, so the September gas spike is already locked in. Gas also sets the price of much of Britain's electricity, which is why both fuels are forecast to rise.

Cornwall Insight describes a January rise as “all but certain” because much of the assessment window is already priced in. The Independent reported warnings that costs could surge by nearly £300 a week from January, and that gas prices had already risen 27% year on year.

Who pays most

In October, gas bills rose about 8% while homes without gas saw less than 1%, because the VAT cut offset higher electricity costs, LondonLovesBusiness reported. The typical cap for standard credit payers is £1,861 a year, £138 more than for direct debit. The typical prepayment cap is lower at £1,678.

Low-income households face a smaller cash rise in absolute terms, but it takes a larger share of income. The gas unit rate is forecast to reach about 9.76p in January, and larger gas-heated homes face the steepest cash rise. All-electric homes face electricity near 30.3p per kWh, a rise of about 15%.

On Cornwall Insight's January forecast, the typical gas bill would rise from about £865 to £1,040 a year, and electricity from about £858 to £959. Households that use well above typical gas would see increases well above the headline £276.

Reaction and support calls

Andy Burnham, described in the Independent's report as prime minister, said: “For many families, the energy bill is the one they dread the most. I don't accept that it has to be this way, and I am determined to bring down costs for good. But I know people can't wait. Families need breathing space now. That's why, from today, VAT is gone from your electricity bill.”

The End Fuel Poverty Coalition urged ministers to prepare an “emergency heat tariff” to cap the cost of heating this winter. Simon Francis, co-ordinator of the coalition, said: “With the number of households in fuel poverty set to soar again and at the most dangerous time of the year, the Chancellor has no choice but to act to provide increased targeted support to vulnerable households. If ministers do nothing, millions will spend this winter in cold, damp homes, unable to cook a hot meal. People will get ill. Some will die.”

Energy UK's deputy director of customer policy Ned Hammond said: “With wholesale gas prices at a three-year high and energy debt predicted to reach £7 billion by the end of 2026, it is clear that urgent action needs to be taken. The Government must provide additional targeted support to households most in need this winter.”

MoneySavingExpert's forecast puts the January cap at around £2,152 a year, a 24.9% jump and about £429 more than the October figure. MSE warns the forecast is still relatively early and could move significantly before the final figure is known. Martin Lewis said: “I'm afraid it's now predicted the energy Price Cap will rise 24% in January” and urged households on the cap to consider fixing.

What happens next

Ofgem will announce the January to March cap on 25 November. The VAT cut on electricity runs until 31 March next year. Fixed tariffs priced below the forecast January cap could save a typical home around £200 a year if the rise happens as predicted, according to comparison-site estimates reported by LondonLovesBusiness.