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Thursday, February 22, 2024

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Ofgem price cap: Energy bill prices will rise from today

The energy regulator Ofgem confirmed a new price cap would be introduced in January 2024 last month.

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Energy bills will rise by £94 for many households across Gedling borough from today.

The energy regulator Ofgem confirmed a new price cap would be introduced in January 2024 last month.

It means the average household will see their annual bill increase to £1,928 – but the exact amount you pay depends on your usage.

The price cap changes every three months affecting households on default or variable tariffs.

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Richard Neudegg, director of regulation at Uswitch.com, said the rise would bite during the coldest period when households need to use the most energy.

He said: “The price cap will go up by 5% from January due to the increases in the wholesale energy market. 

“This means energy bills are likely to be the highest they’ve ever been for most homes this winter.

“Between January and March, average bills will be £46 more expensive than the same period last year when the government’s Energy Bill Support Scheme was in place.”

Jonathan Brearley, chief executive of Ofgem, admitted it would be a ‘difficult time’ for many people, and called the increase ‘worrying’.

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He said: “This rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay. 

“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.”

Those households in the borough on prepayment meters will continue to receive a government-backed discount to ensure that they aren’t charged more than those who pay by direct debit – although it’s not a cap on the overall amount people will pay for their energy.

Instead, it caps the amount that they pay per kilowatt hour, or unit, of gas and electricity.

The £1,928 figure is calculated based on what Ofgem thinks an average household will use.

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How does the energy price cap work?

The energy price cap works by setting a limit on the maximum amount suppliers can charge for each unit of gas and electricity.

That means despite the energy price cap being £1,928, you might pay more or less than this amount, depending on your usage.

Ofgem also sets a maximum daily standing charge which is what households have to pay to have their home connected to the National Grid.

The cap is calculated based on the wholesale price of gas and electricity.

It also includes allowances for tax, charges paid to the energy networks, green levies and social payments.

The reason it has gone up so much in the last 18 or so months is partly due to Russia limiting its gas supply to Europe.

But there’s also been high demand from Asia which has seen prices surge.

The UK also imports more than two-thirds of its gas which is subject to global price swings making prices more volatile and likely to rise.

Spotted something? Got a story? Email our newsdesk news@gedlingeye.co.uk

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