Ofgem confirms energy price cap will soar to £3,549 from October in 80% rise

Ofgem chief executive Jonathan Brearley warns of hardship energy prices will cause this winter

The UK’s energy regulator has set the new price cap at £3,549 from October 1, marking a sharp 80 per cent rise in the cost of energy.

Ofgem said it was not sharing projections for January when a new cap will take effect as the market continued to be too volatile.

However, there are fears the market for gas in winter will lead to “significantly worse” prices through next year.

Millions across Britain are facing the cost of soaring energy bills, compounded by Friday’s announcement, after wholesale gas prices have continued to rise after the pandemic.

The power crisis has turned grimmer in Europe in the wake of Russia’s invasion of Ukraine and Moscow’s move to curtail gas exports to Europe.

The energy price cap is the maximum amount that gas suppliers can charge customers per unit of energy.

Ofgem decides the price cap by observing what wholesale energy prices do over several months.

It then multiplies this price per unit by the number of units of gas and electricity that an average household uses in a year.

To this it adds several charges. These include VAT, green and social levies, charges paid to the energy networks, and a small amount of profit.

The cap is designed to limit the amount of profit that an energy supplier can take but it does not limit the profits of the companies that sell the same energy to that supplier.

Adam Scorer, chief executive of fuel poverty charity National Energy Action, said: “The scale of harm caused by these price rises needs to sink in. A warm home this winter will be pipedream for millions as they are priced out of a decent and healthy quality of life.

“Households need money in their pockets to weather this storm or we are going to see millions in dangerously cold homes, suffering in misery with unimaginable debt and ill health.

“Action is needed now to prevent the bleakest of winters.”

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Today’s Ofgem price hike is like a dagger to the heart of millions of people up and down the country.

“As a result of the decision, parents will be unable to feed their children, the sick and elderly will be condemned to worsening health, disabled people will go without vital medical equipment and households will be forced into poverty for the first time in generations.

“All the solutions lie at the Westminster Government’s door, yet it is silent in the face of this looming disaster.”

Philippe Commaret, the managing director of energy giant EDF, has warned that half of UK households could be in fuel poverty in January as a result of rocketing prices, while Which? has urged the Government to raise its energy bills discount by at least 150% or risk pushing millions of people into financial distress.

The consumer watchdog said the Government’s financial support for all households must increase from the current £400 to £1,000 – or from £67 to £167 per month from October to March.

However, no immediate extra help will be announced by Boris Johnson’s Government, with major financial decisions being postponed until either Liz Truss or Rishi Sunak is in No 10 after the Tory leadership contest.

On Wednesday, Chancellor Nadhim Zahawi insisted “nothing is off the table” when it comes energy bills, but added that a freeze in the price cap would not deliver “targeted help” for those who need it most.

Based on Wednesday’s gas prices, experts at consultancy Auxilione think the cap will reach £5,210 in January 2023 and £6,823 in April.