Energy bills will rise for millions of households in Great Britain through the coldest months of the year, after the industry regulator announced a surprise increase in gas and electricity costs from January.
The energy regulator, Ofgem, said on Friday that the government’s cap on energy prices will go up by 0.2% in the three months to March, equivalent to increasing the typical annual dual-fuel energy bill by £3 to £1,758.
The unexpected rise from the October to December level came despite predictions that households would benefit from a short-lived reprieve from rising energy bills because of falling wholesale market prices. However, the growing cost of the government’s energy policies has pushed the cap higher.
The change in the cap – which dictates the maximum that suppliers can charge their 29 million household customers for each unit of gas and electricity – amounts to an increase of 28p a month for an average household. Ofgem said that when adjusting for inflation the cap is 2%, or £37, lower than the same period in 2025.
However, bills for this winter are expected to remain about 50% higher than they were before Russia’s invasion of Ukraine triggered a jump in energy market prices that spurred the cost of living crisis.
Just this week experts at the consultancy Cornwall Insight had been forecasting that the cap would fall by 1% because of lower wholesale energy prices, before rising again in April because of rising levies on bills.
Ofgem said wholesale prices were currently stable and had fallen by 4% over the past three months, but conditions remained “volatile”.
The cap increase will hit hardest for households who rely more on electricity than gas for their cooking and heating, in a blow to government ambitions to encourage households to replace their boilers and gas hobs with electric alternatives to cut emissions.
Martin Lewis, the founder of MoneySavingExpert.com, warned that households with high electricity use, and low or no gas use, will see their bills rise by 3% to 4% because the cap on electricity costs has climbed higher than the cap on gas.
The cap on electricity unit rates will climb by 5.1% to 27.69p a kilowatt hour to reflect the rise in government levies used to pay for the build out of electricity networks and to support the government’s warm home discount scheme. Meanwhile, the cap on gas will fall by 5.7% to 5.93p a kwH due to the falling wholesale cost of gas.
“The prediction is a 4-5% rise in April because of policy costs, and they are going to keep going up until the mid-2030s,” Lewis told BBC Radio 4’s Today programme. “We need a national debate about this because these policy costs are going to make an ever bigger proportion of our bills.”
He called for a social tariff for vulnerable customers who cannot shop around for deals to be introduced, because the energy price cap that is meant to protect them is too expensive and not fit for purpose.
Tim Jarvis, the director general for markets at Ofgem, said: “While energy prices have fallen in real terms over the past two years, we know people may not be feeling it in their pockets.
“The price cap helps protect households from overpaying for energy. But it’s only a safety net and there are practical ways that customers can pay less for their energy.”
Official figures show that UK energy debt has climbed from £2bn three years ago to £4.4bn this year. Figures from Citizens Advice show that nearly 7 million people in Great Britain are living in households in debt to their supplier – about 10% of the population.
The fuel poverty charity National Energy Action called on the chancellor, Rachel Reeves, to use next week’s budget to help tackle the “crippling levels of household energy debt” by taking the cost of some environmental levies off the energy bills and recover the costs through general taxation.
Reeves is understood to be looking at plans to tackle rising household costs by eliminating the 5% VAT charge on electricity bills.
The minister for energy consumers, Martin McCluskey, said: “We know that energy bills remain too high. We are taking the long-term action needed to bring down bills for good with the government’s clean power mission.”
