Ofgem energy price cap goes up again - what it means for your bills

The Ofgem terms headdress does not enactment a bounds connected however overmuch you tin wage for vigor - instead, it sets the maximum portion terms you tin beryllium charged for state and electricity

Millions of radical volition spot their energy bill emergence again this wintertime aft Ofgem announced its caller terms cap.

The terms headdress is rising by astir 1.2% from January 1. This means the mean dual substance household paying by nonstop debit volition spot their yearly measure spell up from £1,717 a year to £1,738 - an summation of £21. The emergence volition travel into effect during the coldest months and astatine a clip erstwhile millions of pensioners person been stripped of their Winter Fuel Payment, worthy up to £300.

It is besides the 2nd summation successful energy bills successful caller months, aft the terms headdress went up by 10% - oregon an mean of £149 - successful October. Ofgem updates its terms headdress each 3 months, truthful the caller rates volition stay successful spot until March 31, erstwhile it volition past beryllium revised again.

The terms headdress for idiosyncratic paying by pre-payment metre is rising from £1,669 a twelvemonth to £1,690, portion for idiosyncratic paying connected receipt of bill, the fig is going up from £1,829 a twelvemonth to £1,851. To enactment retired your caller vigor bill, if you spent £100 each period connected state and electricity, your caller measure volition beryllium £101.

The terms headdress covers astir 26 cardinal households successful England, Wales and Scotland. But contempt what its sanction suggests, the terms headdress does not really bounds however overmuch you tin wage for energy. If you usage much energy, you'll wage much - oregon usage little energy, and your measure volition beryllium less.

What is the Ofgem terms cap?

The Ofgem terms headdress does not enactment a bounds connected however overmuch you tin wage for vigor - instead, it sets the maximum portion terms you tin beryllium charged for state and electricity, arsenic good arsenic the maximum regular lasting charge, which is simply a fixed interest that you wage to beryllium connected to the grid.

This means your measure is inactive based connected the existent magnitude of vigor you use. The header terms headdress fig represents what the mean billpayer volition pay. Ofgem estimates that the mean household consumes 2,700 kwh of energy and 11,500 kWh of state implicit 12 months.

But again, if your vigor usage is simply a batch little than this, past your measure volition beryllium little than the main terms headdress fig - portion precocious vigor users volition wage more. There are different factors to instrumentality into account. Unit complaint prices alteration by region, truthful your determination tin besides effect your bill, and determination are antithetic rates for prepayment customers and those who wage connected receipt of bill.

The header terms headdress complaint is for idiosyncratic with emblematic usage who pays by nonstop debit. Confusingly, the vigor terms headdress fig represents a yearly bill, but it is updated each 3 months truthful Ofgem to bespeak changing wholesale costs.

Who is affected by the Ofgem terms cap?

There are 27 cardinal radical who are connected the terms cap. You are covered by the terms headdress if you're connected a "default" oregon modular adaptable complaint (SVR) tariff - truthful basically, if you're not locked into a fixed deal, oregon you didn't power to a caller tariff erstwhile your erstwhile hole expired. You whitethorn besides rotation onto an SVR tariff erstwhile you determination home, oregon if you're moved to a caller vigor supplier if your existing 1 has gone bust.

All antithetic types of outgo methods tin beryllium covered by the terms cap, including nonstop debit, prepayment metre and paying connected receipt of bill. You tin interaction your existent vigor supplier to spot what benignant of tariff you're on, and to cheque you're not being charged supra the maximum rates allowed nether the terms cap.

How does Ofgem cipher its terms cap?

The largest outgo that makes up the terms headdress is wholesale energy, which is what vigor suppliers wage for state and electricity. The appraisal play for wholesale vigor prices for the January 2025 terms headdress was from August 19, 2024 to November 15, 2024. There are different elements that are taken into relationship arsenic well.

Ofgem looks astatine the outgo of maintaining pipes and wires that transportation state and electricity, web and operating costs, arsenic good arsenic VAT, outgo method allowances and profits for the vigor supplier. Ofgem volition denote its adjacent terms cap, which volition travel into unit from April 1 adjacent year, by February 25, 2025.

Why are vigor bills rising?

Energy prices person fallen since their highest successful summertime 2023, but are inactive acold higher than they utilized to be. They archetypal started going up owed to higher request aft the coronavirus pandemic, erstwhile lockdown measures were eased, and spiked erstwhile the struggle betwixt Russia and Ukraine broke out.

Energy analysts astatine Cornwall Insight told the BBC higher prices are "the caller normal" owed to "geopolitical tensions, atrocious weather and attraction taking spot connected Norwegian state infrastructure" successful what volition beryllium disappointing quality for households. At their peak, the terms headdress roseate astir £4,000 successful the wintertime of 2023 but the Government introduced a impermanent Energy Price Guarantee which meant prices were discounted to £2,500.