The new cap will apply from 1 July and reflects the cost of supplying energy to households on standard variable tariffs. Ofgem said the increase is largely the result of higher gas and electricity prices on global markets in recent months, now being passed through to consumers.
Gas will see the biggest rise in unit costs, up by around 24 per cent, while electricity unit prices will increase by about 5 per cent. The regulator stressed that the quoted annual figure is based on average usage and that individual bills will still depend on how much energy people use, where they live and how they pay.
Around 22 million households on standard variable tariffs will be directly affected by the change, with higher standing charges and unit rates feeding into bills over the summer. Roughly 40 per cent of customers on fixed deals will not see an immediate change, though they could face higher costs when those tariffs end if market prices remain elevated.
Because the increase lands in warmer months, many homes are expected to feel the full impact only later in the year as usage rises. Anti-poverty groups warn that, after several years of price shocks, any further increase risks deepening fuel stress among low‑income households.
Iran conflict blamed for surge
Officials have pointed to the conflict involving Iran and disruption around the Strait of Hormuz as key factors behind the latest rise in wholesale energy prices. The strategic waterway is a major route for global oil and gas shipments, and tensions there have pushed up market prices that feed into the UK cap.
The current rise is the first Ofgem update to fully reflect the recent spike in global prices following the escalation of the conflict. Analysts say that even if tensions ease, the damage to infrastructure and supply chains means prices could remain volatile for some time.
Energy secretary Ed Miliband called the rise “deeply unwelcome news” and said ministers were monitoring the situation “ahead of the winter” while preparing contingency plans. He argued that repeated fossil fuel shocks underscored the need to speed up investment in domestic clean energy and home insulation to cut exposure to global gas markets.
Earlier this year, the government shifted part of the cost of green levies from bills into general taxation, helping to reduce the cap in April. That relief has now been outweighed by the latest surge in wholesale prices, and campaigners are pressing for new, targeted help for vulnerable households before winter.
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What consumers should do
Ofgem and consumer groups are urging households to check their current tariff and keep meter readings up to date so bills reflect actual use rather than estimates. Anyone struggling to pay is advised to contact their supplier early to discuss support options or repayment plans rather than allowing debts to build up.
With another price cap decision due in the autumn, households face continued uncertainty over where bills will go next. For now, the message from regulators and ministers is that, while the market remains tied to global events, further sharp swings in energy costs cannot be ruled out.
