OFGEM PRICE CAP RISES 4% AS AVERAGE BILL HITS £1,723

Ofgem's energy price cap rises by 4% from Thursday, 1 October, affecting households on standard or variable tariffs across England, Scotland and Wales. The average dual-fuel bill for a household paying by direct debit will reach £1,723, up £60 a year or £5 a month, if that rate were sustained over 12 months. One report put the number of households still on standard tariffs at more than four million, while another estimated about 20 million homes are on variable tariffs governed by the cap. Ofgem attributed the increase to higher wholesale gas prices linked to the conflict in the Middle East, saying volatile global markets remain the dominant driver of price changes. The rise coincides with the government's removal of VAT from electricity bills, also taking effect on Thursday, which official estimates suggest will save the average household around £45 a year.

The VAT cut runs until 31 March next year and does not apply to gas, which remains subject to 5% VAT. According to one report, the policy was announced in July by Andy Burnham as one of his first moves after becoming prime minister. Homes on standard tariffs with average usage are expected to spend £145 on energy in October, up from £109 in September, which is attributed to cooler weather and higher unit rates under the new cap. Comparison site Uswitch urged households without smart meters to submit readings to their supplier by the end of the month to avoid being charged the higher rate for energy used before 1 October. Ofgem is due to announce its next price cap, covering January to March 2027, in November.

Forecasts for that January cap differ: consultancy Cornwall Insight predicted a 16% rise to £1,999, up £276 a year, while supplier EDF forecast a steeper 30% increase to £2,098, up £375. Craig Lowrey of Cornwall Insight said the rise would come at a difficult time, with households still recovering from Christmas spending amid cold weather. EDF's chief executive, Simone Rossi, said the UK was "walking into a second energy crisis" and called for the electricity VAT cut to be extended. Cornwall Insight linked the pressure to disruption of gas supplies tied to the Middle East conflict and low gas storage levels across Europe, warning that rebuilding stocks could keep bills high beyond winter. Both forecasts remain predictions pending Ofgem's official announcement in November.