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British household energy prices will stay high this winter, with the average annual bill set to be about £600 above pre-crisis levels, adding to cost of living concerns.
Regulator Ofgem announced on Friday that the new energy price cap will be £1,923 for the October through December period this year, down from £2,074 in the current period.
Despite the slight decrease, the end of universal government support for energy bills means the effective cost for many of the poorest households will increase compared with last winter.
Jonathan Brearley, chief executive of Ofgem, acknowledged that households that use less energy than average would pay “slightly more” this winter.
“I’m afraid prices are going to be volatile for some time to come,” Brearley said in a BBC Radio Four interview. “The price today is way higher than before the crisis. So many many families are going to struggle.”
The government pointed out that low income households were continuing to receive help towards the cost of living, including £900 paid in three instalments.
But allies of Jeremy Hunt, the chancellor, said they did not expect to see a repeat of the £400 universal payment to all households now that energy prices were on a downward trajectory.
The “price cap” does not limit how much consumers pay if they use more than the typical amount of energy, instead it mandates a maximum cost per unit for electricity and for gas.
The previous reduction in the price cap, which took effect in July, was a much more dramatic cut from the earlier level of £3,280.
The decline is due to lower wholesale gas and electricity prices, though a recent gas price surge across Europe is likely to push up the cost of energy in the first quarter of next year.
Citizens Advice, the independent consumer watchdog, urged the government to step in with more targeted support for low-income households.
“Typical households are still facing sky-high energy costs, now that support schemes have come to an end,” said Gillian Cooper, head of energy policy at Citizens Advice, adding that record numbers of households are already behind on bills.
“The next few months will push households like these over the edge. Our data suggests it will be as bad, if not worse, than last winter,” she said.
The end of government aid programmes, such as the universal £400 Energy Bill Support scheme, in effect also means that the cost of energy for many households will increase this winter compared with last.
Ofgem also increased the standing charge for households — a daily charge that is paid regardless of energy used — by about 2 per cent, which it said reflected higher operating costs for suppliers due to inflation.
Calculations from the Resolution Foundation, a think-tank, indicate that more than a third of households across England — primarily lower energy users — will face higher bills this winter than last.
The average household’s annual energy bill will be about £200 lower this winter, taking into account the reduction in government support, according to the think-tank.
Cornwall Insight, an energy consultancy, forecast that annual prices during the first half of next year would increase to above £2,000 because of the volatile energy prices.
Energy security secretary Grant Shapps said: “It’s encouraging families will see their energy bills continue to fall from October . . . We are successfully driving [Russian president Vladimir] Putin out of global energy markets so he can never again hold us to ransom.”
However, Labour’s shadow energy minister, Ed Miliband, said the new figures were the result of “13 years of failed Tory energy policy”, adding that “Labour would act to close loopholes and bring in a proper windfall tax on oil and gas giants to help tackle the cost of living crisis”.
