Energy price cap rises to £1,723
Ofgem's 4% cap rise pushes typical bills to £1,723 as arrears head for £7bn and Labour's £300 pledge quietly dies.
Ofgem confirmed on Wednesday that the energy price cap rise will lift the cap by 4% from 1 October, pushing the typical dual-fuel bill to £1,723 a year, the highest level in three years.
The rise adds roughly £60 a year to household bills. It lands on top of a winter that was already getting harder to afford before this week’s announcement.
Energy UK warned this month that household energy debt could hit £7bn by the end of the year, up from a record £6bn in June. At least 2 million households are expected to be struggling to pay by December. Every one of them will be chased for money they do not have, while everyone else quietly picks up the tab: unrecovered arrears already add around £50 to every household’s bill, whether that household owes a penny or not.
That £50 charge is the part nobody put in a manifesto. It is a flat, regressive levy, paid by people who settled their bill on time to cover the debts of suppliers who cannot recover theirs, and it will grow as arrears climb toward £7bn.
Rising wholesale gas costs keep the Energy price cap rise locked in To understand why a 4% rise lands so hard, it helps to know what is actually in a bill. Wholesale gas and electricity now make up only 30% of a typical household’s electricity charge. The rest, so-called “non-commodity” costs, covers grid charges, contracts for wind and solar generators, carbon taxes, the warm home discount and a £70bn transmission-upgrade programme, equivalent to roughly £1,000 for every person in Britain. Those costs do not fall when wholesale gas prices ease, which is why bills have stayed high even as the immediate crisis of 2021-22 faded from the headlines.
Labour fought the 2024 election promising that clean power would cut household bills by £300 a year by 2030. That pledge rested on 2023 modelling from the analysts Ember, whose own author has since said it needs updating because offshore wind costs have changed. The government’s parallel promise of 95% clean power by 2030 is now expected to land at more like 80 to 85%, because building has fallen behind schedule. EDF Energy’s own forecast, published this week, shows the price cap still at £1,786 in 2030, “stubbornly high” even if wholesale prices calm down. Only 52,000 heat pumps were installed in Britain last year, against more than a million new gas boilers, a measure of how far the promised transition still has to travel.
Burnham’s first move, swamped in a month
This is the government Andy Burnham inherited when he became prime minister on 20 July, after Keir Starmer resigned as Labour leader in June having lost his MPs’ confidence, with the cost of living, and energy bills specifically, central to his fall. Burnham’s first policy act as prime minister was cutting VAT on household electricity, saving an average £45 a year, funded by scrapping the digital ID programme. That cut takes effect the same day as this week’s cap rise. Even after it, the cap is still going up by around 3.6%, according to MoneySavingExpert’s analysis. One month into a “cost of living government”, the flagship measure has already been outrun by the bill it was meant to soften.
New energy secretary Miatta Fahnbulleh, who took over from Ed Miliband in the reshuffle that followed Burnham’s arrival, is expected to point to volatile wholesale prices and the wider Middle East conflict as drivers of the rise. Both are real pressures. But they do not explain why non-commodity costs, the grid upgrades and green-levy charges that make up 70% of a typical bill, remain opaque to the public paying them. EDF itself is now demanding “a radical increase in transparency” on transmission spending and wants Ofgem to publish an independent bills outlook before the year is out. That transparency is owed first to the households already paying £50 extra to cover other people’s arrears, not to a supplier trying to sell heat pumps.
The Conservative alternative, and its holes
The Conservatives, endorsing a report from the Onward thinktank, want to scrap the 2050 net-zero target after 2029 in favour of more gas and nuclear, claiming £320bn in savings by 2050, or £540 a year per household. Shadow energy secretary Claire Coutinho has a fair point when she says government has never published a full accounting of what renewables cost once backup and grid balancing are included. But the headline Conservative savings figure does not survive scrutiny: Carbon Brief has identified ten separate flaws in the Onward costing, from the assumptions on gas price forecasts to how quickly new nuclear could actually be built. A grievance about missing transparency is not the same as a costed alternative, and this one is not one.
What is left is a Labour government that promised £300 off bills and delivered a rise, a Conservative opposition promising £540 off bills on numbers that do not add up, and roughly 2 million households who will spend this winter fielding calls from energy companies about money they do not have, while paying £50 extra to cover the debts of households in exactly the same position.
