Ofgem Cap Rises: Why Your Bills Have Gone Up (Again), And How To Save Money

If your energy bills are looking startling right now, you’re certainly not alone.

Back in October, energy regulator Ofgem increased the energy price cap – which limits the maximum rates energy suppliers can charge for those on default tariffs – by almost 4%.

For a typical household on such tariffs, paying £1,663 a year for gas and electricity, this means an annual bill increase of around £60 (or an extra fiver a month) providing your usage stays at the same levels.

The issue is, usage goes up in winter – and with a cold snap predicted, plenty of households are set to feel the squeeze, as the more energy we use to heat our homes, the more we pay, even with a cap in place.

The energy price cap is in place to prevent around 22 million households on default tariffs from being ripped off by suppliers, as it limits the maximum rates and standing charges that they can charge.

It is updated every three months to reflect changes in the costs of supplying energy. The next cap review will come in January, and Money Saving Expert predicts it might jolt up by 28.8%, which would take a typical household’s bill up to £2,219 a year.

For those on fixed tariffs – around 11 million households – the cap change doesn’t immediately affect them as their tariffs will be agreed for a set period of time.

It’s largely down to higher wholesale gas prices as a result of the ongoing conflict in the Middle East.

But Ofgem did note that prices remain 52% below the height of the energy crisis in 2022, when the government stepped in to cap bills at £2,500.

With predictions estimating that the cap may rise by over 20% come January, some finance experts are recommending switching to a fixed tariff before that comes into play.

As Money Saving Expert’s site reads: “While many of the cheapest fixes are now more expensive than the current cap, most can likely still save compared to the Cap over the next 12 months, with the likely hikes in the high-use period from January.”

They added that many of the cheapest fixed tariffs right now tend to be longer ones – spanning 18+ months – which offer price certainty for longer, but are also fixed on quite high rates. These “may look less competitive in a year” if the conflict in the Middle East de-escalates, the financial pros suggested.

Their advice? “If you choose to go long, do also focus on low exit penalties which let you lock in for peace of mind, but with a get-out-of-jail cheaply card, if you want to ditch it for something cheaper later.”

The government has also removed VAT from all domestic electricity bills, which – in theory – means your electricity bills should remain stable.

But Ofgem said most of the increase in the price cap is driven by higher gas costs, with gas bills rising by around 8%.

Neil Kenward, Ofgem’s Director General for Markets, said consumers can save by “choosing a fixed tariff” and added “many suppliers offer tariffs with cheaper electricity to smart meter customers for electricity consumed out of peak times”.

It’s also worth considering different payment methods, he said, “with prepayment customers paying the lowest price cap rates, and could save consumers an average of about £45 compared to direct debit”.

You can also check out our tips for lowering heating bills this winter.

If you’re struggling with your bills, speak to your energy provider who might be able to offer affordable repayment plans.