Rise sparks government action

It had been widely anticipated for months now, but yesterday’s announcement by Ofgem that the energy price cap will increase by £693 a year from April was far from welcome news for anyone.

As background, the price cap sets a limit on the maximum amount suppliers can charge customers on standard tariffs for each unit of gas and electricity you use and sets a maximum daily standing charge (what you pay to have your home connected to the grid). That has now risen by £693 – an increase of 54%.

Reports coming out say that the average customer’s bill will now rise to £1,971 annually.

Ofgem commented: “The increase is driven by a record rise in global gas prices over the last six months, with wholesale prices quadrupling in the last year. It will affect default tariff customers who haven’t switched to a fixed deal and those who remain with their new supplier after their previous supplier exited the market.”

Government response

Just after the announcement was made, Chancellor Rishi Sunak was in the House of Commons to update MPs on the action the Government would be taking to combat the rise.

The overall message was that a £350 overall ‘rebate’ would be available which can be split into two parts:

  • The first part is a rebate that helps spread the extra cost by giving domestic electricity customers a £200 discount on their bills in October. This rebate will then be repaid over the next five years in equal instalments of £40 a year.
  • In April, households in Bands A to D (around 80% of all homes in England) will receive a Council Tax discount of £150.

Additional measures

Sunak announced that the Government will also provide local authorities with a discretionary fund of nearly £150m to help lower income households in higher Council Tax bands, as well as those households in bands A to D who are exempt from Council Tax.

And, finally, Sunak confirmed that they will go ahead with existing plans to expand eligibility for the Warm Home Discount by almost a third, meaning 3million vulnerable households will now benefit from that scheme.

Calls had been made to remove VAT on energy bills, but Rishi commented that this would only have saved households on average £90 a year, so the rebate scheme announced was a better option.

Other calls had been made to put a stop to the Social & Healthcare levy rise coming into effect from April, but nothing was forthcoming on that front.

If the Ofgem news hadn’t quite been bad enough, the Bank of England then announced that the base rate was increasing from 0.25% to 0.5% – the second rise in three months.

Check your Council Tax band – GOV.UK (

Check if the energy price cap affects you | Ofgem