UK energy bills are set to fall by £138 by April – despite households expecting a rise on Thursday during the next bout of cold weather.
Experts at Cornwall Insight said they expect energy bills to fall by £138, or 8 per cent, to £1,620 a year when the cap is next updated in April due to government measures announced in the recent Budget.
Chancellor Rachel Reeves said £150 would be cut from the average household bill from April by scrapping the Energy Company Obligation (Eco) scheme introduced by the Tories in government.
Wholesale energy prices have also dropped in recent weeks, which is set to keep a lid on energy price hikes from April, according to Cornwall Insight.
But, before then, many households’ energy bills are to rise on New Year’s Day, just as a swathe of cold health alerts have been issued for large areas of the UK.
The 0.2 per cent increase to Ofgem’s energy price cap will equate to a rise of about 28p a month for the average household in England, Wales and Scotland remaining on a standard variable tariff.
This amounts to an average overall bill of £1,758 a year, up from the current £1,755.
Regulator Ofgem said Thursday’s increase in the cap, which was announced in November, was being driven by the funding of nuclear power projects and discounts to some households’ winter bills.
This included funding the government’s Sizewell C nuclear power plant in Suffolk – with an average of £1 added to each household’s energy bills per month for the duration of the £38 billion construction.
An increase to standing charges – the amount consumers pay per day to have energy supplied to their homes – was also largely due to costs linked to the government’s warm home discount scheme.
Around 2.7 million more low-income households, including 900,000 families with children, are eligible for the £150 discount this winter.
However, the regulator said the new price cap was £37 lower than a year ago when adjusted for inflation.
Ofgem’s price cap sets a maximum rate per unit and standing charge that customers can be billed when they are not on a fixed tariff.
It does not limit total bills because households still pay for the amount of energy they consume.
The price cap increase comes just as a yellow warning for snow and ice has been issued for parts of Scotland north of the central belt from 6am on New Year’s Day until midnight on January 2.
It comes as amber cold health alerts have been issued for the North East and North West of England, which are due to remain in place until noon on January 5, with temperatures expected to fall to 3-5C.
Yellow cold health alerts have been issued by the UK Health Security Agency (UKHSA) for London and the East, South East and South West of England, as well as the East and West Midlands and Yorkshire and the Humber.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “It really is a case of every little doesn’t help as households spend a fifth winter in the energy bills crisis. Tiny movements in the price cap still hit hard for families choosing between heating and eating.
“People continue to live in cold, damp homes, where the risks go beyond discomfort and into real danger, including exposure to carbon monoxide. Younger adults, private renters and households with children are among those most at risk as people cut back on heating, delay repairs and try to block draughts just to stay warm.
“Meanwhile, the wider energy industry has made more than £125 billion in UK profits since 2020, including firms operating in a dying North Sea. This isn’t a crisis of scarcity, it’s a crisis of priorities. Ministers must move beyond short-term price cap tweaks and get serious about ending fuel poverty by investing in energy efficiency, reforming energy pricing, introducing a fair social tariff and fully funding the warm homes plan.”
Which? energy editor Emily Seymour said: “As we head into the coldest months of the year, many households will be concerned that the energy price cap will increase slightly in the new year.
“There are several deals on the market for lower than the price cap so now is a good time to shop around if you’re looking to fix. As a rule of thumb, we’d recommend looking for deals cheaper than the current price cap, not longer than 12 months and without significant exit fees.
“If you’re on a variable tariff, make sure to submit a meter reading to ensure you pay the cheaper rates for any energy used before the new price cap takes effect.”