Energy bills are set to rise by two per cent this winter – double the rate analysts had predicted – in a fresh blow for millions of struggling households. Regulator Ofgem has increased the energy price cap to £1,755, a hike of £35 from the current level, affecting around 21 million households across England, Scotland and Wales.
The price cap, which regulates the maximum amount suppliers can charge per unit of gas and electricity, was set at 7am on Wednesday and will come into effect from the start of October. It will last for three months before being reviewed again, based largely on wholesale energy market costs.
Energy consultancy Cornwall Insight had forecast the average household energy bill would increase by just £17 to £1,737 per year when the new cap comes into effect. The larger-than-expected increase compounds concerns about household finances as winter approaches, particularly following the government’s controversial decision to restrict Winter Fuel Payments.
Gas Standing Charges Jump 14 Per Cent
Hidden within the announcement details is a significant 14 per cent increase in gas standing charges, whilst gas unit rates remain almost double pre-crisis levels. Electricity costs have also risen, with prices set by the most expensive generator, typically gas-fired power stations.
Simon Francis, coordinator of the End Fuel Poverty Coalition, warned: “The average family are still paying hundreds of pounds more than they did just a few years ago. Given that wind and solar are far cheaper ways of generating power and North Sea gas reserves are unable to meet domestic heating needs from 2027, it’s time for action.”
The current price cap of £1,720 per year, in place until 30 September, had represented a seven per cent decrease from the previous quarter. However, the October increase means households will face higher bills just as temperatures begin to drop and heating demand rises.
Government Blames “Fossil Fuel Penalty”
Minister for Energy Michael Shanks acknowledged families’ concerns: “We know that any price rise is a concern for families. Wholesale gas prices remain 75 per cent above their levels before Russia invaded Ukraine. That is the fossil fuel penalty being paid by families, businesses, and our economy.
He emphasised the government’s strategy: “That is why the only answer for Britain is this government’s mission to get us off the rollercoaster of fossil fuel prices and onto clean, homegrown power we control, to bring down bills for good.”
The minister highlighted urgent support measures, including expanding the £150 Warm Home Discount to 2.7 million more households. However, critics argue these measures fail to offset the wider impact of rising bills and benefit restrictions.
Winter Fuel Payment Cuts Compound Misery
The price cap increase comes as households face the double blow of restricted Winter Fuel Payments. Following a controversial policy change, the payment is now means-tested, with only those receiving Pension Credit or certain other benefits eligible for the £100-£300 support.
Previously universal for all pensioners, the change affects approximately 10 million older households. The government later announced a partial reversal, stating that from winter 2025/26, all pensioners will receive the payment, but those with annual incomes above £35,000 will have it recovered through the tax system.
Campaigners warn many households continue to struggle with bills, especially those paying off debt accumulated during recent periods of high prices. Age UK research shows two in five pensioners have already cut back on heating, with nearly half worried about affording to heat their homes adequately.
Broken Pricing System Needs Reform
Simon Francis called for comprehensive reforms: “We need urgent reforms to fix the broken pricing system, steps to ensure households benefit from targeted support for cold homes, a nationwide insulation and ventilation drive, reform of energy trading rules and lower standing charges.”
The new assumptions behind Ofgem’s price cap include the expansion of the Warm Home Discount scheme, which adds approximately £15 to the average annual bill. The scheme will provide £150 support to an additional 2.7 million vulnerable households, with people on means-tested benefits automatically receiving the discount.
Cornwall Insight explained that previous qualifications based on property size have been scrapped, expanding eligibility. However, consumer groups argue the support remains insufficient given the scale of price increases since the energy crisis began.
Bills Remain Historically High
Despite falls from peak levels, energy bills remain significantly elevated compared to pre-crisis levels. The July to September 2025 price cap of £1,720 is still 42 per cent higher than winter 2021/22 rates, before Russia’s invasion of Ukraine sent wholesale prices soaring.
The price cap mechanism itself has faced criticism for failing to protect consumers adequately. Originally introduced in 2019 to prevent suppliers from overcharging customers on default tariffs, the cap now covers the vast majority of households as competitive fixed deals have largely disappeared from the market.
Ofgem reviews the cap quarterly, with the next adjustment due in January. Analysts predict prices may stabilise or fall slightly in early 2026, but warn that bills are unlikely to return to pre-crisis levels in the foreseeable future.
Clean Energy Mission Promised
A Department for Energy Security and Net Zero spokeswoman reiterated: “The only way to bring down energy bills for good is with the Government’s clean energy superpower mission, which will get the UK off the rollercoaster of fossil fuel prices and on to clean, homegrown power that we control.
She added: “We are taking urgent action to support families this winter – in addition to expanding the £150 Warm Home Discount to 2.7 million more households, we are strengthening customer protections, including by giving people quicker and easier access to automatic compensation when their suppliers let them down.”
However, energy poverty campaigners argue that long-term promises offer little comfort to households facing immediate hardship this winter, with many forced to choose between heating and eating as bills consume an ever-larger share of household budgets.
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