Millions of households face paying 1.2% more on their energy bills from January 1, as Ofgem’s energy price cap has increased.
The energy regulator is urging customers to look for better deals as choice of fixed energy tariffs on the market increases.
The energy regulator’s price cap - which sets the maximum rate per unit and standing charge that can be billed to customers for their energy use - will increase by £21 for an average household per year from today.
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Ofgem says an average household paying by direct debit for dual fuel faces paying £1,738 per year on the new price cap, up from £1,717 between October and December.
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This is 10 per cent cheaper compared to January-March 2024 (£1,928) and 57.2% (£2,321) less than during the energy crisis (January-March 2023).
It may be possible to save more - billpayers could save up to £140 by switching to a better deal on the market, Ofgem said.
Analysis by the energy watchdog shows around 1.5 million households switched tariff between September and November.
While switching could save you money, a fixed rate tariff could mean you’re exposed to potential price drops in the future.
Tim Jarvis, director general of markets at Ofgem, said in November: “With more tariffs coming into the market, there are ways for customers to bring their bill down so please shop around and look at all the options.”
He added that anyone struggling with bills should “speak to their supplier to make sure they’re getting the help they need and look around to make sure they’re on the best, most affordable deal for them”.
Will energy bills rise again?
The next energy price cap will be announced later this month and take effect on April 1.
The price cap is predicted to rise to £1,785 a year for a typical dual fuel consumer - a nearly 3% increase from January - according to the latest forecast by energy consultancy Cornwall Insight.
The previous forecast suggested the April price cap could reach £1,762 a year.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight, said the prediction would be "disappointing" to households.
He added: "However, the turbulence in wholesale markets - a level of volatility we haven’t seen for months – reminds us to remain cautious of predictions, which could very well increase or decrease several times before the April cap is set.
“With a Trump presidency on the horizon, and an uncertain geopolitical situation in the Ukraine and the Middle East, wholesale market volatility looks set to remain.
“To add to the wholesale turbulence, other cost measures being decided upon by Ofgem and the government have the potential to move the cap up or down. As we look ahead, consumers must brace for continued fluctuations.
“Ultimately, the security of energy supply, and Ofgem’s evolving policies will shape the trajectory of bills as we move into 2025 and beyond. It's crucial for policymakers and industry stakeholders to work together to ensure fair and sustainable energy pricing for households."
Ofgem called for suppliers to offer more choice with low and no-standing charge tariffs in August, and the regulator has since proposed forcing energy suppliers to offer a low or no standing charge option.
While some people, such as customers with lower energy usage, may benefit from a lower standing charge, these tariffs can have a higher unit rate, meaning some could be worse off.
