Households face unexpected rise in energy prices in new year

Millions of households across England, Wales, and Scotland will see a small but unwelcome rise in their energy bills at the start of January after Ofgem announced its latest price cap. The increase of zero point two percent came as a surprise, especially after early forecasts suggested the cap might fall rather than rise in the new year.

The adjustment affects customers on variable tariffs and arrives at a time when winter temperatures are dropping sharply. Many households are already feeling the strain of high energy costs, and the news has immediately renewed concerns about affordability during the coldest months of the year.

Ofgem said the change is largely driven by government policy and operating costs. One example is the contribution toward the Sizewell C nuclear project, which adds around one pound a month to the average energy bill. Tim Jarvis, a senior official at Ofgem, explained that even though wholesale energy prices have stabilised, they still make up the largest part of household bills. Because of this, consumers remain vulnerable to price swings.

The latest cap reflects rising electricity unit rates, which are only partially balanced by a small drop in gas rates. Households that rely heavily on electricity for heating or appliances may feel the increase more than those who use more gas. Prices will still be slightly lower than the same period last year, but the small rise is enough to worry many families already dealing with tight budgets.

Jarvis reminded consumers that the cap is a protective limit, not a fixed bill. People are still encouraged to shop around for better deals if available. Fixed tariff options may help some households avoid further increases later in the year.

To help people understand the impact, Ofgem uses a model of a typical household consuming eleven thousand five hundred kilowatt hours of gas and two thousand seven hundred kilowatt hours of electricity each year. For such a household paying by direct debit, the annual bill would rise from one thousand seven hundred fifty five pounds to one thousand seven hundred fifty eight pounds. But as energy usage varies widely, the regulator recommends that consumers calculate the percentage change based on their own past bills for a more accurate estimate.

Standing charges, which cover the fixed costs of maintaining the network and government levies, will also rise. Electricity standing charges will increase by two percent while gas standing charges will go up by three percent. These charges apply regardless of how much energy a household uses, adding further pressure on low income families.

Dame Clare Moriarty of Citizens Advice said the announcement highlights the ongoing struggles faced by households. She noted that bills remain far higher than they were before the energy crisis began, and with another rise expected in April, long term solutions are urgently needed.