Households have been urged to lock into fixed-rate energy deals now or risk being hammered by a rise in the price cap on tariffs from July. The energy regulator today confirmed that the annual bill for a typical household on a standard tariff will soar by 13% – or £221 – from £1,641 to £1,862.
It marks the sharpest rise since the energy crisis and piles fresh pressure on millions of families already struggling with the cost of living. Comparison site Uswitch said households that fail to switch could miss out on savings of around £250 a year, with the cheapest fixed tariff currently available from Fuse Energy priced at £1,614 for a typical home.
Richard Neudegg, director of regulation at Uswitch, said: “July’s serious price rise is the biggest jump we have seen in years, but the real concern is what comes next. Millions of households will soon see their energy rates rocket. With prices forecast to stay high, the real pain will come when the heating goes back on in the autumn and through winter.
“Households are on a standard variable tariff by default – so if you haven’t switched, your rates will go up in July unless you take a good fixed deal. No one wants to think about winter during hot weather, but fixing your energy deal now means you can opt out of these rises entirely.
“Households can currently lock in a rate that undercuts the July cap by around £250 for the average home. For anyone still on a standard tariff, your bill will go up unless you act.”
Wednesday’s announcement by Ofgem comes after wholesale gas prices surged amid escalating tensions in the Middle East. Ofgem chief executive Tim Jarvis 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.”
Speaking on BBC Radio 4’s Today programme, Mr Jarvis warned elevated prices could continue into winter and urged households to prepare. He said consumers could “try to fix in the market” now to “insulate them against some of that volatility”.
Campaigners warned the increase would deepen the financial strain on struggling families. The End Fuel Poverty Coalition said average annual bills will now be £820 higher than in winter 2020/21 – a rise of 79%.
Simon Francis, coordinator of the coalition, said: “Behind every energy price rise are households whose direct debits are about to rise, families whose energy debt is harder to clear, and pensioners whose summer is already overshadowed by the winter ahead. With energy costs rising over the summer, any chance households had to reduce energy debts or build up reserves before the winter heating season will be wiped out.”
He also warned suppliers may increase direct debit demands immediately in anticipation of higher winter usage. The coalition said gas unit costs are up 28% on the previous quarter and 16% year-on-year, while electricity prices have remained broadly flat.
Research from Uswitch suggests around two-thirds of households on standard tariffs are unaware prices are about to rise, despite most saying even a 10% increase would hit their finances.
The price cap affects around 60% of households in Britain who remain on default variable tariffs. It limits the unit rates and standing charges suppliers can levy, but total bills still depend on energy usage. Analysts are also warning that another increase could follow in October if global gas markets remain under pressure.