Experts issue energy bill 'red warning' as price cap rise risks pushing millions into fuel poverty

The average energy bill will surge by more than £221 per year from today (1 July) as the energy price cap rises, a hike that will “push millions into fuel poverty.”

Ofgem’s latest price cap – which sets the limit suppliers can charge customers for gas and electricity over three month periods – comes into effect today.

The US-initiated conflict in Iran has spiked the costs of wholesale energy, making for sobering reading. The average energy charge for typical households under the cap in England, Wales and Scotland will increase to £1,862 per year, up 13%.

Almost 5.5 million homes will now be forced to spend 20% of their income on energy bills, the End Fuel Poverty Coalition warned, up from 4.3 million in April this year.

The number of households forced to spend more than 10% of their income on energy bills will surge to 13.5 million, up from almost 11.3 million in April.

“Households don’t experience the Ofgem price cap as a percentage on a graph, they experience it as a bill going up while energy industry price shock profiteers make billions,” a spokesperson for the coalition said.

“Millions of people are in energy debt or worried about falling behind, millions more will face a summer of rising bills that wipes out any chance they had to prepare for winter.”

The £221 hike is the latest surge as energy prices have risen in recent years. The latest price cap rise means energy bills will be more than 70% higher than what they were in winter 2020-21, before Russia’s invasion of Ukraine.

In May – when the price cap was announced – Ofgem CEO Tim Jarvis attributed the latest increase to “continued volatility in global energy markets.”

“We understand many will be concerned about rising prices,” said Jarvis. “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.”

Under the new cap, electricity rates will increase from 24.67p a kilowatt hour to 26.11p, and gas rates will rise from 5.74p to 7.33p – for households that pay via direct debit.

Adam Scorer, chief executive at National Energy Action, described the rise as a “red energy warning,” calling on the government to enable Ofgem to expand its debt relief scheme.

“The legacy of the energy crisis is millions of households locked into debt they cannot repay, and that is pushing up bills for everyone,” Scorer said. “If we fail to act, we risk seeing more households forced onto prepayment and effectively cut off from energy. That cannot be the answer to a problem caused by unaffordable bills.”

Read more

• Energy bills to rise as millions struggle with cost of living: ‘People are already rationing’
• Energy bills will fall in April. But will it be enough for people living in fuel poverty?
• Is the cost of living crisis back? And will prices in the UK ever come down?

Citizens Advice Scotland (CAS) called on Ofgem to take action to end fuel poverty, including a “robust” debt write-off scheme.

“Energy is not just about heating. It is what keeps daily life running: it powers the fridge that keeps food and medication safe, the washing machine that families rely on and devices people need to work, study or stay connected,” said CAS energy spokesperson Molly Shevlin.

“For disabled people energy is even more critical. It charges wheelchairs and mobility aids and keeps essential medical equipment operating.”

Consultancy Cornwall Insights has predicted a slight 0.5% dip in Ofgem’s price cap in October.

“The Iran ceasefire gave the markets some breathing room, but this is a pause, not a resolution to the conflict. What comes out of the final agreement, if there is one, will matter enormously for energy prices,” said Craig Lowrey, principal consultant at Cornwall Insight.

“Even in the best-case scenario, the enduring effects from the conflict will be with us for a while.”

If you need help paying your energy bills, here’s Big Issue’s guide on how to get support.

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