Energy prices will rise by at least £139 or 12 percent per year for millions of people across the UK in October, right at the start of the cold weather, regulator Ofgem has announced.
The Office of Gas and Electricity Markets (Ofgem), which is the government regulator for the electricity and downstream natural gas markets, announced on Friday that the price cap for default domestic energy deals would be raised to cover suppliers' extra costs.
The hike, which will affect more than 15 million households, comes on the heels of a sharp rise in wholesale energy costs over the last six months, with natural gas prices hitting a record high as inflation soared amid the easing of pandemic restrictions.
Typical customers with scheduled direct debit tariffs will face the greatest growth, with their bills leaping to a record average of £1,277 per year, while the average fee for prepayment customers will rise to £1,309, Ofgem said.
Ofgem Chief Executive Jonathan Brearley depicted it as the “extremely difficult news for many people,” adding that “higher energy bills are never welcome and the timing and size of this increase will be particularly difficult for many families still struggling with the impact of the pandemic.”
"The price cap means suppliers only pass on legitimate costs of supplying energy and cannot charge more than the level of the price cap, although they can charge less,” he explained.
Brearley cited the record increase in the prices of fossil fuel, gas and electricity, and diesel, as the main reason for the increase in the price cap.
He stated that Ofgem does not have the legal power to force energy companies to sell below cost to bear the pain.
Charities warned the timing would deal a heavy blow to troubled families, who already face losing an extra £20 a week from Universal Credit in October.
Ofgem reviews and changes the price cap twice a year, while requiring energy suppliers to charge below the limit.