Household energy bills are set to rise again this autumn, with typical annual costs projected to reach £1,729 – the highest average for domestic consumption since July 2023. The increase comes as energy regulator Ofgem prepares to announce its updated quarterly price cap this Wednesday, with industry forecasts pointing to a 4% climb starting October 1.
Rising wholesale costs drive the increase
The upcoming rise reflects higher wholesale energy costs, which have been triggered by the ongoing conflict in the Middle East. Additionally, heatwaves across continental Europe have increased gas demand for power generation and cooling, further pushing up prices.
Energy analysts at Cornwall Insight project that average domestic bills will hit £1,729 per year under revised usage definitions. This marks the highest average cost for typical domestic energy consumption since July 2023, according to a report by Henry Saker-Clark.
VAT removal relief eroded
Global energy market fluctuations have erased the financial relief that was expected from the planned removal of VAT on electricity. Prime Minister Andy Burnham had previously indicated the tax cut would shave £45 off annual energy bills.
A Government spokesman confirmed that tackling the general cost of living remains a priority for ministers this winter. The spokesman stated: "We're acting to give consumers breathing space with the cost of living – cutting VAT on energy bills, ensuring around six million households get the £150 warm home discount this winter, and making millions of homes cheaper to run through our warm homes plan."
Government pledges diplomatic efforts
Ministers also pledged ongoing diplomatic efforts aimed at stabilising international markets. "Alongside our efforts to support rapid de-escalation in the Middle East, we will do everything we can to shield consumers from global energy shocks and bring down bills for good," the Government added.
Energy UK chief executive Dhara Vyas warned that current emergency relief frameworks remain insufficient for vulnerable families. She stated that households need systematic, long-term support structures rather than temporary policy fixes.
She said: "Too many households continue to feel the strain of high energy bills. Instead of relying on stop-gap, ad hoc or emergency measures, we need a better, targeted and more permanent way to give people confidence that they'll get help when they most need it."
