Updated

Updated · Yahoo Finance UK · Aug 23

Ofgem Set to Raise U.K. Energy Cap 4% to £1,729 as Middle East Conflict Lifts Gas Prices

Updated

Updated · Yahoo Finance UK · Aug 23

Ofgem Set to Raise U.K. Energy Cap 4% to £1,729 as Middle East Conflict Lifts Gas Prices

Q: Could Ofgem's recent adjustment to typical household benchmarks be masking the true financial impact of October's rate hike?

Yes. Ofgem’s revised “typical household” benchmark can make October’s increase look smaller than many households will feel in practice. The key change is not the cap mechanism itself but the usage assumptions behind the headline annual bill. Since July, Ofgem has lowered its benchmark from 2,700 kWh of electricity and 11,500 kWh of gas a year to 2,500 kWh and 9,500 kWh. That automatically reduces the quoted “typical” annual bill, even if unit prices rise. That is why the expected October cap is being presented as about £1,729, up from £1,663. On the old benchmark, the same cap would be about £1,941, up from £1,862. The percentage rise is still around 4%, but the lower headline can soften the apparent scale of the increase in cash terms. For households using more than Ofgem’s new benchmark — especially families in larger or less efficient homes — the real financial hit could be materially higher than the headline suggests. What matters on bills is the actual cap on unit rates and standing charges, not the illustrative annual figure. Cornwall Insight’s forecast points to electricity rising to about 26.57p/kWh and gas to 7.90p/kWh, with standing charges around 55p/day and 31p/day. The benchmark shift does not mean Ofgem is hiding prices; it reflects lower average consumption. But it can complicate comparisons with past caps and risk understating how much many households will actually pay, particularly going into winter when gas use typically jumps.

3 articles · Updated · Yahoo Finance UK · Aug 23

Wednesday's Ofgem decision is expected to lift the October-December annual cap for a typical household to £1,729 from £1,663, the highest average bill since July 2023.
A 4% rise is being driven by Middle East-related market uncertainty and European heatwaves, which have raised wholesale energy prices and boosted gas demand for power and cooling.
The October cap will take effect as households begin using heating more regularly, increasing winter bill pressure even though the cap itself lasts only three months.
About £45 of relief from the government's planned VAT removal on household electricity bills has been more than offset by the recent swing higher in global energy prices, Cornwall Insight said.
The government says six million households will receive the £150 Warm Home Discount this winter, while Energy UK says more targeted support is still needed.