A £94 increase to the average annual household energy bill has come into effect after the regulator upped its price cap in response to a rise in global gas market prices.
The change, taking effect from 1 January, means average households are beginning 2024 with a 5% increase in energy bills – at the start of what could be the coldest three months of the year.
Every three months the energy regulator for Great Britain, Ofgem, sets a maximum price that suppliers can charge customers on standard variable tariffs for each unit of energy. wallet with money Glimmers of hope: your personal finance diary January-April 2024 Read more
The increase means that for the period 1 January to 31 March, the price cap is £1,928 a year for a typical household that uses gas and electricity and pays their bill by direct debit. That is up from £1,834 a year during the final three months of 2023.
It doesn’t. It increases when the market price increases, it decreases when the market price falls.
The point of the price cap isn’t to be some sort of subsidy of consumer energy costs - though the government did some separate stuff along those lines with the energy price guarantee (which capped the typical household’s energy bill at £2,500 for the period it was relevant) or the support scheme in winter 2022 when the taxpayer paid everyone £400. The price cap is now below the energy price guarantee so the subsidies are no longer relevant.
The price cap is just a way of giving people who chose to be on variable tariffs a little bit of predictability of what they’ll be paying for energy three months ahead when the market prices are moving around.