Millions of households across Britain are facing a double blow of rising energy costs and freezing temperatures as the new year begins. From Thursday, 2 January 2025, the energy price cap set by regulator Ofgem will increase slightly, adding further pressure to budgets already strained by the winter chill.
The Details of the Price Cap Increase
The average annual energy bill for a typical household in England, Wales, and Scotland on a standard variable tariff will rise to £1,758. This marks an increase of £3 from the current cap of £1,755, equating to an approximate extra 28p per month. Ofgem confirmed this 0.2% adjustment back in November, attributing it to two key factors.
Firstly, part of the rise funds the government's Sizewell C nuclear power plant in Suffolk. Throughout its £38 billion construction, this project adds an average of £1 to each household's monthly bill. Secondly, an increase in daily standing charges is linked to the expansion of the Warm Home Discount scheme. This winter, the scheme's eligibility has widened, offering a £150 discount to around 2.7 million more low-income households, including 900,000 families with children.
It is crucial to note that the price cap sets a maximum rate per unit of energy and for the daily standing charge; it does not limit a household's total bill, which depends entirely on consumption.
Bitter Weather Compounds the Financial Chill
The timing of this increase could not be more stark, as a severe cold snap grips the nation. The UK Health Security Agency (UKHSA) has issued a series of health alerts. Amber cold health alerts are active for the North East and North West of England until noon on 5 January, with temperatures predicted to drop to 3-5°C.
Furthermore, a yellow warning for snow and ice is in place for areas of Scotland north of the central belt from 6am on New Year's Day until midnight on 2 January. Yellow cold health alerts also cover London, the East, South East, South West of England, the East and West Midlands, and Yorkshire and the Humber.
Expert Warnings and Calls for Action
Consumer groups and campaigners have reacted with concern to the confluence of rising costs and cold weather. Simon Francis, coordinator of the End Fuel Poverty Coalition, stated that "tiny movements in the price cap still hit hard for families choosing between heating and eating." He warned of the dangers of cold, damp homes and criticised the wider energy industry's profits, estimated at over £125 billion in the UK since 2020.
Francis urged ministers to move beyond short-term measures and invest in long-term solutions like energy efficiency and a fair social tariff. Meanwhile, Emily Seymour, energy editor at Which?, offered practical advice to consumers. "There are several deals on the market for lower than the price cap," she said, recommending households consider fixed tariffs cheaper than the cap and without high exit fees.
She also advised those on variable tariffs to submit a meter reading before the new cap takes effect to ensure they are charged the lower rate for energy used up to that point. Despite the current rise, Ofgem notes that the new price cap is £37 lower than it was a year ago when adjusted for inflation.
