Hundreds of pounds added to energy bills in Wednesday announcement

Regulator Ofgem has revealed the level of the annual energy price cap for July to September for a typical dual fuel household across England, Scotland and Wales. Analysts Cornwall Insight predicted last week that the cap would rise by £209 a year to £1,850 from July 1 – an increase of 13% on April’s £1,641 annual cap. On Wednesday, Ofgem announced a 13% increase to £1,862 a year. Customers will see a smaller price increase of around 5% on their electricity bills compared to gas bills, which are rising by 24%, Ofgem said. Based on the energy use of a typical domestic household, from July the price cap will rise by £18 a month for the average household using both electricity and gas if this level was sustained for a year. The current price cap for a typical household paying by direct debit for gas and electricity is £1,641. Ofgem chief executive Tim Jarvis said: “Today’s price change reflects continued volatility in global energy markets. This means higher wholesale gas prices, driven by ongoing conflict in the Middle East, is impacting the price we pay for energy. “We understand many will be concerned about rising prices. While energy use typically falls over the summer months, there are still practical steps households can take to manage costs, including exploring fixed tariffs or changing their payment method. Smart meter customers can also take advantage of half price or cheap electricity at the weekends. “While our energy supplies remain secure, the best way to limit this exposure is by investing in our energy network. That’s why we’re unlocking the funding needed for the biggest transformation of our lifetime to deliver a system that is secure, resilient and works for consumers across Great Britain.” It sets a maximum price per unit of gas and electricity used, meaning households only pay for the amount of energy they use. This means households will be largely shielded over the warm summer months, but concerns are growing over a painful hit when the cap is reviewed in October and energy demand rises as temperatures drop. Calls have been mounting for the Government to set out action to support the most vulnerable, but Chancellor Rachel Reeves stopped short of any immediate energy measures in her cost-of-living plan. She told MPs last week: “We stand ready to act if market conditions worsen significantly later this year and I have been leading cross-Government contingency work on design of potential future targeted and temporary support for businesses.” Energy costs have been sent rocketing higher by Iran’s move to block the crucial Strait of Hormuz shipping route, through which a fifth of the world’s oil and gas is carried. Households have yet to feel the impact, as the price cap is reviewed on a quarterly basis, and April saw a 7% drop thanks to Government measures to reduce bills. This included moving 75% of the cost of the UK’s renewables obligation from household bills on to general taxation, and scrapping the energy company obligation scheme. Campaigners have warned over an “extremely difficult winter” ahead for the most vulnerable without extra support on bills. Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Households need reassurance and support, not a summer of suspense. That means the Government must act before winter to spell out what support will be available.” The Government has insisted that “tackling the affordability crisis is our number one priority”. Its package of support measures so far includes a cut in the rate of VAT on attraction tickets over the summer holidays, free bus travel for children in England during August, extending the 5p-per-litre fuel duty reduction and lowering import tariffs on more than 100 types of food products. But the lack of further action on energy bills is seen as holding back spending by cash-strapped consumers. Economist Martin Beck, at WPI Strategy, said recent official figures showing lower retail sales in April was already a sign that “energy pressures are biting”. “Higher petrol prices, the prospect of an increase in household energy bills in July and weakening consumer sentiment all point to a more cautious spending backdrop,” he said.