Energy bills to rise by more than expected ahead of winter

Energy bills: Gas and electricity prices will rise by 2% for millions of households under the latest cap announced by energy regulator Ofgem.

The increase, which is slightly more than analysts expected, means a household using a typical amount of energy will pay £1,755 a year, up £35 a year on the current cap.

It will kick in at the start of October, which campaigners say will mean another winter of relatively high energy bills.

Higher bills are the result of extra financial support for those on benefits, and costs involved in matching the supply of energy with demand, which includes switching generators such as windfarms on and off.

For a typical household, bills will rise by about £2.93 a month.

• About £1.42 a month of the increase will fund the government’s extension of the Warm Home Discount, giving money off winter bills for people on some benefits

• About £1.23 extra a month will go to the cost of ensuring a stable electricity supply, to balance when there is too much and too little power in the system

• Fixed costs to run the gas network have also risen and will take up another 72p a month Some other costs have fallen slightly.

Ofgem uses the idea of a typical household, using 11,500 kWh of gas and 2,700 kWh of electricity a year, paid for by direct debit, to illustrate its calculations.

Finances under pressure Ofgem’s cap sets the maximum price that can be charged for each unit of gas and electricity for millions of households in England, Scotland and Wales.

Individual households can calculate their estimated specific change by adding £2 onto every £100 they spend at the moment on energy each year.

The increase comes as families are also facing rises in other basic costs. The British Retail Consortium said that food costs were rising at their fastest rate since the February of last year, with the price of chocolate, butter and eggs soaring.

The energy cap sets the maximum price for each unit, but not the total bill which depends on how much energy you use.

The change comes into force at the start of October and lasts for three months.

Ofgem changes the cap, largely based on the cost of energy on wholesale markets.

However, the rise in bills this time is partly the result of the higher-than-expected costs to transmit energy to where it is needed in the country according to demand. This may include costs to switch off wind farms due to grid capacity issues and also firing up gas-fired power plants when supplies are short.

Extra support measures for consumers, previously announced by the government and in place this winter, have also contributed to higher bills.

Anyone on means-tested benefits will automatically receive the £150 Warm Home Discount on their bills. Some previously did not qualify owing to the size of their property, but that condition will be scrapped.

All billpayers will chip in to fund this extra support, mainly through higher standing charges – the fixed cost of connecting to the supply.

It means standing charges will typically rise by 4% for electricity and 14% for gas, with the latter rising from 29p a day to 34p.

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