MILLIONS of households in Britain will see higher energy bills from October after regulator Ofgem raised its price cap by 2 per cent.
The new cap for average annual use of electricity and gas will be 1,755 pounds, an increase of about 35 pounds from the July-September level.
Ofgem said the rise was mainly due to higher network and policy costs.
The increase comes as inflation reached an 18-month high in July and the government faces pressure over the affordability of its net zero plan.
Domestic energy prices are lower than their 2023 peak but remain about 50 per cent above levels in summer 2021, before Russia’s invasion of Ukraine led to a surge in gas prices across Europe.
In June, the government said an additional 2.7 million households would be eligible for the warm home discount this winter, extending the scheme to support 6 million vulnerable households with 150 pounds off their bills.
Ofgem said the expansion added 1.42 pounds a month on average to all bills.
Consumer groups said energy costs were still difficult for many households and called for more support.
The government said the long-term solution was reducing reliance on fossil fuels.
"The only answer for Britain is this government’s mission to get us off the rollercoaster of fossil fuel prices and onto clean, homegrown power we control," Energy Minister Michael Shanks said.
Ofgem sets the quarterly price cap using a formula based on wholesale energy prices, suppliers’ network costs and environmental and social levies. Wholesale energy prices fell around 2 per cent over the latest assessment period.
Analysts at Cornwall Insight said the cap could fall in January if wholesale prices drop, but policy costs such as a fee on bills to fund the Sizewell C nuclear plant could keep charges higher.
"These policy-driven costs are part of a broader shift in how we fund the energy transition... yet some of the funding will ultimately need to come from billpayers," said Craig Lowrey, principal consultant at Cornwall Insight.
(With inputs from agencies)
