Household energy bills will increase sharply from July as the price cap rises by 13%, adding £221 a year to typical dual-fuel bills. The new cap, set by regulator Ofgem, will reach £1,862 a year from July 1, meaning households will pay around £18 more each month.
Global Energy Costs Drive Up Prices
The increase follows a surge in global energy costs triggered by escalating tensions in the Middle East. Prices spiked after Iran responded to military action involving the US and Israel by restricting access through the Strait of Hormuz, a key shipping route that carries around a fifth of the world's oil and gas. The disruption pushed up wholesale gas prices, a major factor in UK electricity costs.
However, a recent agreement between the US and Iran to de-escalate the conflict has helped stabilise markets. As shipping routes begin to reopen, oil and gas prices have started to fall, easing pressure on future energy costs.
Analysts Predict Steady Cap in October
Analysts at Cornwall Insight now expect the price cap to remain broadly steady when it is next reviewed for October. That would come as a relief to households facing the prospect of higher bills as colder weather returns and energy use typically increases around that time.
Ofgem is due to announce the October to December cap level by August 26 and while forecasts suggest stability, uncertainty remains over whether further government support will be introduced, reports PA.
Government Support Under Consideration
Earlier this year, Rachel Reeves indicated that targeted help could be considered if energy prices stayed elevated. With ongoing cost of living pressures, any decision on support is likely to be closely watched. Even without another rise in October, many households are already struggling. Recent figures from Ofgem show that energy debt hit a record £4.79bn in the first quarter of the year, up 15% compared with the same period last year.
Industry Calls for Reform
Industry leaders are also calling for broader reform of the energy system. Nigel Pocklington, chief executive of Good Energy Group, said repeated global shocks had exposed weaknesses in how the market operates. He urged policymakers to consider measures such as removing policy costs from bills, breaking the link between gas and electricity pricing and increasing investment in renewable energy.
“The current system is neither fit for purpose nor structured in a fair way for households,” he said, adding that long-term changes were needed to deliver a cleaner and more affordable energy system.
With bills rising again this summer and uncertainty lingering into winter, households face a difficult period despite hopes that the worst of the increases may soon ease.
