Customers of every major energy firm will pay more from July 1 on the price cap (Image: Getty)
UK households of every major energy firm, including British Gas, EON, and EDF are set to pay £221 more per year for gas and electricity from July 1.
Ofgem has today (Wednesday, May 27) announced its latest price cap for energy bills, which will take effect from July 1 to September 30.
The energy regulator has increased the price cap by 13%, up by £221 to £1,862 a year for a typical household. Of course, this cap figure is an illustration based on average use – if you use more, you’ll pay more.
On pure unit rate levels, electricity will increase from 24.67p per unit to 26.11p per unit on average, while gas will increase from 5.74p per unit to 7.33p per unit, a hefty increase.
The price cap affects households not on fixed deals, which is still the majority of bill payers, though it is usually cheaper to switch to a fixed deal that undercuts the price cap.
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The increase was widely anticipated following conflict in the Middle East, which has pushed up the wholesale cost of gas, the metric used to calculate pricing for the UK energy market.
Ofgem chief executive Tim Jarvis defended the price cap increase. He said: “Today’s price change reflects continued volatility in global energy markets. This means higher wholesale gas prices, driven by ongoing conflict in the Middle East, is impacting the price we pay for energy.
“We understand many will be concerned about rising prices. While energy use typically falls over the summer months, there are still practical steps households can take to manage costs, including exploring fixed tariffs or changing their payment method. Smart meter customers can also take advantage of half price or cheap electricity at the weekends.
“While our energy supplies remain secure, the best way to limit this exposure is by investing in our energy network. That’s why we’re unlocking the funding needed for the biggest transformation of our lifetime to deliver a system that is secure, resilient and works for consumers across Great Britain.”
Susannah Streeter, chief investment strategist at Wealth Club, said: “The rise in the energy price cap in the UK from July is set to weigh on already fragile consumer confidence. Household energy prices will rise by 13% due to soaring wholesale costs, a highly unwelcome change, just as bills had been reducing.
“Regulator Ofgem says a household using a typical amount of gas and electricity will pay £221 more a year, taking the annual bill to £1,862. The increase is likely to deepen pressure on household finances just as many consumers had started to feel some relief from the cost-of-living squeeze.
“Higher energy costs are expected to leave households with less money to spend on everything from eating out and holidays to wardrobe upgrades, raising fresh concerns for retailers, hospitality businesses and the wider services sector, which relies heavily on discretionary spending.”
Energy Secretary Ed Miliband said: “The rise in the price cap because of a war we did not choose is deeply unwelcome news for households across the country. We know people were under pressure before this crisis, and that’s why easing that burden is our number one priority.
“We will continue to monitor the situation ahead of the winter and plan for all contingencies. In the immediate term it is essential to de-escalate this conflict to bring oil and gas prices down and as Britain faces the second fossil fuel crisis of this decade, we must learn the right lessons.
“The way to get bills down for good and avoid these price spikes is to go further and faster with this government’s drive for clean homegrown power we control. We are upgrading as many homes as possible ahead of winter with the biggest investment in warm homes in British history.”
Ned Hammond, deputy director of customer policy at Energy UK, which represents firms, said: “A rise of this scale will already be a concern for millions of customers but such worries will be magnified if bills remain at this level – or higher – over the winter months.
“So the Government must now focus on how it can best target support later in the year to those customers most in need – in addition to the help suppliers already offer.
“It’s another unwelcome reminder – coming too soon after the last one – of how our country’s high dependence on gas leaves us exposed to price spikes we can do nothing about resulting from conflicts thousands of miles away.”