UK Energy Bills Set to Rise Despite Ofgem's Price Cap

Energy bills are expected to increase starting from April 2023.

Ofgem, the regulator responsible for overseeing the energy market in the UK, has announced a reduction in the amount that suppliers can charge households for energy.

Despite Ofgem's price cap, household bills are still expected to rise in April 2023, as the UK government support is scaled back. It's worth noting that Ofgem's announcement does not directly impact the unit price of gas and electricity, but rather, it reduces the costs faced by the government.

According to reports, the typical annual household bill is set to rise from £2,100 to £3,000 in April due to a reduction in government support, which is known as the Energy Price Guarantee (EPG). Additionally, a £400 winter discount on all bills will also end. The government currently compensates energy suppliers with the difference between the EPG and Ofgem's cap, which limits the amount that energy companies can charge consumers.

In January, the energy price cap stood at £4,279, but on Monday, Ofgem announced that the cap would drop to £3,280 in April due to falling wholesale prices. Campaigners have called on ministers to prevent the increase, arguing that Ofgem's new cap reduces the cost of support, and therefore, the government should halt the rise in household bills. TUC general secretary Paul Nowak has spoken out, stating that "energy bills are out of control," and that the government should cancel April's hike.

Despite this announcement, Chancellor Jeremy Hunt has previously stated that although the policy remains under review, he does not believe the government has the "headroom to make a major new initiative to help people." Government officials have also highlighted other forms of support, such as rising benefit payments in April, which they say will assist people.

It's important to understand how much households are currently paying for energy. Under the government guarantee, a household using a typical amount of gas and electricity in England, Wales, and Scotland is currently paying £2,500 a year. Without state support, that annual bill would have been £4,279 since January. The chancellor has already announced that the EPG will become less generous in April, which means the typical household will be paying £3,000 a year.

Ofgem's chief executive, Jonathan Brearley, has acknowledged that April's rise in bills is "deeply concerning" for many people. However, he noted that there is some hope ahead, as the announcement reflects a fundamental shift in the cost of wholesale energy for the first time since the gas crisis began. He suggests that although this announcement won't make an immediate difference to consumers, it's a sign that some of the immense pressure that the energy market has faced over the last 18 months may be starting to ease.