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Starting in July, household energy bills in the UK are expected to increase significantly, driven by rising wholesale costs linked to the ongoing conflict in Iran. This development will mark the first time these heightened prices will be reflected in consumer tariffs. The energy regulator, Ofgem, will release new details about the price cap that affects millions of homes with variable energy tariffs across England, Scotland, and Wales.
Industry analysts are forecasting that the price cap will go up by approximately 13%, leading to an additional annual expense of around £209 for a household with average energy usage. This change would bring the typical yearly bill to roughly £1,850. The timing of this announcement coincides with an unprecedented heatwave affecting much of the UK, but experts suggest that consumers can still take proactive steps to reduce their future bills despite the current warm weather.
The price cap is updated quarterly. While domestic energy costs fell by 7% earlier this year between April and July, this was before the Iran conflict intensified. The new cap, which applies from July to September, will take into account a 25% surge in global gas prices directly linked to the war, particularly due to the restricted use of the Strait of Hormuz. Since wholesale costs make up about 40% of a typical gas and electricity bill, the impact of these changes on consumers is significant. Some suppliers even predict that energy prices might rise further as the colder months approach.
The government has stated it is developing targeted assistance programs aimed at supporting vulnerable households before energy bills rise further during the winter season, when consumption typically increases. Households already pay substantially more than before the 2022-23 price shocks—on average about £600 extra each year. A considerable amount of debt remains outstanding to suppliers from unpaid bills, and the strain is particularly tough for individuals with disabilities who rely on energy for essential medical devices throughout the year.
The energy price cap currently covers about 19 million households in England, Scotland, and Wales, although regulatory arrangements differ in Northern Ireland. This cap limits the maximum price suppliers can charge for gas and electricity units on variable tariffs, while customers with fixed tariffs will not see changes until their contracts expire. Ofgem calculates the typical household’s energy use as 11,500 kWh of gas and 2,700 kWh of electricity annually, paid via direct debit.
Despite the headline figures, the increase masks a more pronounced rise in the cost per unit of energy, which remains a challenge for many consumers. Using data from Cornwall Insight, forecasts predict that, starting in July, a typical household bill will reach £1,850, up £209 from previous levels. Alternatively, with revised usage estimates, bills could be £1,667, still meaning a notable increase compared to current figures.
Energy UK, representing suppliers, acknowledges the ongoing affordability issues but highlights that many companies have been providing customers with repayment plans and payment breaks to ease financial pressures. Meanwhile, energy experts report that millions of households have already adopted measures like lowering radiator temperatures, taking shorter showers, sealing drafts, and selectively heating rooms to manage their bills. Continuing to apply these energy-saving practices as prices rise again will be critical in helping households mitigate the impact of the upcoming increases
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