The new Ofgem price cap, effective from January 1, 2024, will result in an average household facing an extra £94 per year. The overall price cap will rise from £1,834 to £1,928.
Breakdown of Price Increases
The unit rate for electricity will increase from 27.35p per kWh to 28.62p per kWh. Gas unit rates will rise from 6.89p per kWh to 7.42p per kWh.
Prepayment Meter Users Exempt from Higher Charges
Over four million households using prepayment meters will continue to receive a Government-backed discount to ensure parity with those paying by direct debit.
Variable Costs Based on Usage and Supplier
While the price cap sets the limit on what providers can charge per unit of energy, the actual cost will depend on individual usage and supplier rates. Variations will occur based on location and payment method.
Future Proposals for Price Cap Adjustment
Ofgem has proposed a one-off adjustment of £16 to be paid by households between April and March 2025. This is aimed at addressing the significant debt in the energy system and preventing the collapse of firms unable to recover debts.
Reasoning Behind Price Cap Increase
The proposed price cap increase is intended to recover the nearly £3 billion debt accumulated by struggling customers and spread the burden across all UK households. Ofgem seeks to ensure suppliers can recover reasonable costs and maintain market resilience.
Debt Recovery and Support for Consumers
Tim Jarvis, director general for markets at Ofgem, stated that addressing the record level of debt in the system is essential. The proposed approach aims to recover costs fairly without unfairly penalizing a specific customer group.
Tips for Saving on Energy Bills
Given the fluctuating energy prices, consumers are encouraged to explore ways to save on energy bills. This includes minimizing energy usage through practical measures and considering energy-efficient appliances. Additionally, accessing support programs such as the Household Support Fund (HSF) can provide financial assistance.
Source: thesun.co.uk
