Households face a £221-a-year jump in energy bills from Wednesday, as Ofgem’s price cap rises to £1,862 for the average dual-fuel home – a 13% increase that follows months of turmoil in global energy markets triggered by the Middle East conflict.
The surge, which adds £18 a month to typical bills, was driven by Iran’s blockade of the Strait of Hormuz after US and Israeli attacks on the country, cutting off a route that carries a fifth of the world’s oil and gas. But a peace deal between the US and Iran this month has begun to reopen the vital shipping lane, sending wholesale gas and oil prices falling.
“Energy bills rise £221 a year from Wednesday, but October cap may hold steady after Iran-US peace deal reopens Strait of Hormuz.”
As a result, analysts at Cornwall Insight say the price cap is now expected to remain fairly steady in October – a reprieve that would spare households from another rise just as they turn on their heating for winter. Ofgem will announce the next quarterly cap level for the period October to December on or before August 26.
The prospect of stable bills comes as a huge weight of debt hangs over the market. Ofgem figures released earlier this week showed that household debt owed to energy suppliers reached a record £4.79 billion in the three months to March – up 5% on the previous quarter and 15% higher than a year ago.
Chancellor Rachel Reeves said earlier this year she would consider providing targeted support in the autumn if energy prices remained high. But with Sir Keir Starmer having resigned, it is unclear who will hold the Treasury when winter arrives. The change in leadership means cost-of-living pressures will be “top of their inbox”, whoever takes over.
Nigel Pocklington, chief executive of Good Energy Group, has called on the incoming prime minister to reform the energy market. In a report titled Rewiring the Market: How to Tackle the Hidden Causes of High Energy Bills, the renewable supplier urges the government to move policy costs off bills and into general taxation, break the link between gas and electricity prices, and use Bank of England loans to incentivise clean energy investment – measures it claims could cut bills by an extra £158 a year.
“Over the past five years, we have witnessed a series of energy shocks due to conflict abroad, proving that our current system is neither fit for purpose nor structured in a fair way for households to pay for their energy,” Pocklington said.
For now, millions of households must absorb the July increase. Whether the peace deal delivers lasting relief – and whether the government steps in to help those already in record debt – will become clearer by the end of August.