Ofgem raises UK household energy price cap by 4% from October
Ofgem will raise its domestic energy price cap by 4% from October as higher wholesale gas costs linked to the Iran war increase household bills.
London, United Kingdom. Most British households will face higher energy bills from October after regulator Ofgem announced a 4% increase in its domestic price cap, citing wholesale cost pressures linked to the war in Iran.
Price cap increase
The cap will rise by £60 to £1,723 ($2,348), from the level in place between July and September. The change will affect about 22 million households on variable tariffs, while the cap covers around 65% of customers.
Ofgem said high international gas prices continued to drive UK energy costs.
“High international gas prices are continuing to drive energy costs in the UK. We welcome the government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter,” said Neil Kenward, Ofgem’s director general for markets.
Impact of conflict
Benchmark wholesale British gas prices have more than doubled since the United States began military action against Iran on February 28, severely curbing shipping through the Strait of Hormuz, which carries a fifth of the world’s liquefied natural gas.
Wholesale costs are the largest single factor in Ofgem’s quarterly price cap, which limits what suppliers can charge households and also includes network and policy costs.
Government response
The increase is a setback for Prime Minister Andy Burnham, who has pledged to ease cost-of-living pressures, and exceeds measures announced last month to reduce tax on electricity bills.
The removal of VAT on electricity prevented a further £45 increase in the cap. In April, the government also shifted some levies, reducing an average bill by about £150.
Energy minister Miatta Fahnbulleh said consumers would be concerned about winter energy costs.
“We will keep looking at what more we can do to protect families from unaffordable bills,” Fahnbulleh said in a statement.
Outlook
With no clear end to the conflict between the United States and Iran, analysts expect wholesale energy costs to remain elevated and said the price cap could continue to rise.
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