Rising gas and electricity costs are expected to compound the record levels of energy debt amassed by households since Russia's invasion of Ukraine. The energy price cap in Great Britain will rise by 13% from July, pushing the average annual bill to £1,862, partly due to the war in Iran.
Sharpest Summer Rise in Four Years
Households will face the steepest summer rise in energy charges in four years after months of soaring market prices caused the government's energy price cap for Great Britain to climb by 13%. Under the cap, the average gas and electricity bill will increase to the equivalent of £1,862 a year from July until the end of September, up from £1,641 in the April-to-June period. This adjustment reflects the rise in global energy market prices triggered by the conflict in Iran.
Government Response
Energy Secretary Ed Miliband stated that de-escalating the Middle East conflict is essential to bring down oil and gas prices. "The rise in the price cap because of a war we did not choose is deeply unwelcome news for households across the country," he said. "The way to get bills down for good and avoid these price spikes is to go further and faster with this government's drive for clean homegrown power we control."
How the Price Cap Works
The energy regulator for Great Britain, Ofgem, sets the maximum a supplier can charge per unit of gas and electricity based on supply costs, including average wholesale market prices in the months before each new cap. The cap also includes a maximum daily standing charge, a flat fee for connection regardless of usage. Under the new cap, households paying by direct debit will see electricity charges rise from 24.67p per kilowatt hour (kWh) to 26.11p per kWh, while gas charges will increase from 5.74p per kWh to 7.33p per kWh.
Impact on Households
The jump to £1,862 a year equates to an extra £18 per month for the average household using both electricity and gas. This is the highest level for the cap since the first quarter of 2024, when it stood at £1,924. In comparison, the cap peaked at £4,279 in the first quarter of 2023, but bills were limited to £2,500 annually by the government's energy price guarantee.
Global Factors Driving Prices
The war in Iran has caused the biggest energy supply shock on record by choking oil and gas exports from the Gulf. In Europe, gas prices have more than doubled from pre-crisis levels and are roughly three times higher than before Russian gas exports to Europe halted after its invasion of Ukraine.
Tim Jarvis, Ofgem's interim chief executive, said the rise in the cap was "almost entirely driven" by the increase in global gas prices resulting from the Middle East conflict. "We have seen wholesale prices increase. They have been very volatile but they have been broadly much higher than they would normally be at this time of year, and that is what is filtering through now into the adjustment to the price cap," Jarvis told BBC Radio 4's Today Programme.
Impact on Motorists
For drivers, the crisis has pushed petrol prices up by almost 20% at the pump to an average of 159.43p per litre on Tuesday, according to the RAC. Diesel prices have surged by more than 30% to 184.96p per litre.
Future Outlook
While rising energy costs will be painful for households this summer, the bigger concern is bills from October, when energy use typically increases in autumn. Jarvis noted that the next quarterly change to the cap, due in October, will largely depend on developments in the Middle East, progress toward a peace deal, the speed of reopening the Strait of Hormuz, and how quickly markets recover. "It is unfortunately now looking like a more long-term disruption to markets than we might originally have hoped," he added.
Debt and Preparation
Rising bills are expected to worsen the record levels of energy debt accumulated by households since Russia's invasion of Ukraine sparked a gas supply crisis in Europe. Jarvis advised people to prepare for potential winter increases, possibly by fixing their energy bills. This would protect customers if the cap rises again, but carries the risk of missing out on savings if prices fall. "You've obviously got the risk there that if prices do come down but it is likely that we are going to see elevated prices this winter. We're not at the moment seeing the sort of price rises that we saw following the Russia-Ukraine war, but it remains a very uncertain situation," he said.
Unpaid energy bills reached a record high of £4.5 billion earlier this year, according to the latest official data. These debts are partly paid down by other bill payers through an annual £52 charge included in the energy price cap.
