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HomeBusinessCap lifts annual bill by £94 from January, Ofgem announces

Cap lifts annual bill by £94 from January, Ofgem announces

  • Ofgem announces £94 increase
  • Gas reliance impacts prices
  • Global events drive instability

Due to its reliance on gas imports, the British energy system remains susceptible to price fluctuations, which, in turn, contribute to ongoing price increases caused by global instability. Bills may increase even further beginning in April.

The annual average energy price limit will increase to £1,928 in January, according to an announcement by the sector’s regulator.

Ofgem estimates that a typical household paying for gas and electricity via direct debit will incur a 5% increase in costs from September to December, or £94 more annually, compared to the annual limit figure.

The revised mean value primarily mirrors increased wholesale expenses expected during the winter season and also incorporates a modification in Ofgem’s limit computation, which is predicated on the average energy consumption of households.

Ofgem stated that instability and global events, specifically the conflict in Ukraine, are the cause of the increase.

Many expected the increase rate, but it nevertheless strains people financially in the coming year.

Despite a decline in inflation from its energy-driven apex of over 11%, the economy continues to experience rapid price growth.

Concerns Over Bill Payers

Dr Craig Lowrey, CEO of Cornwall Insight, thinks bill payers’ situation is deteriorating.

Concerns will not be limited to persistently high unit costs throughout 2024, according to Dr. Lowrey. The impending increase in electricity standing charges beginning in April adds an additional factor to the mix.

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He noted that without energy support measures in the autumn statement, consumers may reduce energy use to lower bills.

Citizens Advice termed this omission a “missed opportunity,” stating that they are currently assisting an unprecedented number of individuals with energy debt and are encountering a greater number of individuals than ever before who are unable to purchase prepayment meters.

Reliance on Energy Imports

Dr. Lowrey further stated that even households with limited electricity usage are not immune to the increases, given that standing charges for gas and electricity account for approximately 16% of total household bills and have risen and are expected to rise again in April.

He stated that the reliance on energy and petroleum imports into the United Kingdom is the primary issue.

“A long-term strategy is required to reduce our reliance on energy imports, specifically gas.”

Energy prices for households and businesses can be stabilized. We can begin to break free from international market fluctuations by investing in domestic renewable energy sources.

However, consumers may benefit from switching electricity providers or plans, according to Jonathan Brearley, chief executive officer of Ofgem.

“We are also witnessing the return of choice to the market, which is a positive development; customers may find it advantageous to compare prices as a variety of tariffs are now accessible, each providing the assurance of a fixed rate or a more adaptable offer that remains below the price cap.”

Mr. Brearley recommended that consumers consult reputable sources for impartial guidance. They should contemplate whether prioritising the security of a fixed contract or the lowest price is more crucial.

The current winter’s lack of universal support for energy expenses can be attributed to the recovery of wholesale prices for natural gas in Europe subsequent to the surge in demand observed last year.

Despite this, they continue to be elevated, and the price limit exceeds the pre-pandemic average by more than £1,000.

UK economy growth expectations cut for two years

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