On Thursday, 23rd November 2023, the UK’s energy watchdog, Ofgem, made an important announcement regarding energy prices in the first quarter of 2024.
Starting from 1st January and lasting until 31st March 2024, the energy price cap will see a 5% increase compared to the previous quarter. For an average household that pays via direct debit for both gas and electricity, this translates to a total annual cost of £1,928, marking a £94 increase over the course of a year, or roughly £7.83 more per month. The purpose of this price cap, which is reviewed every quarter, is to establish the maximum amount energy suppliers can charge their customers.
The reason behind yet another price hike is primarily attributed to escalating expenses in the international wholesale energy market. This surge is mainly a consequence of market instability and global developments, with particular attention given to the ongoing conflict in Ukraine.
Ofgem have said they are committed to utilising all available tools to ensure that these costs are distributed fairly and to provide support for customers facing financial difficulties. But it is a sure thing that many will struggle with yet another rise pushing energy prices to an unaffordable amount for many.
Solar Panels & Battery Storage
It is no secret that home owners all over the UK have been looking to renewable energy systems to beat the energy price hikes. Solar Panels and Battery Storage systems can slash as much as 80% from an energy bill if used properly and this has proved a real life saver for many home owners who otherwise may be without heating this winter. By using the suns energy to power your home you are putting less reliance on there grid and giving yourself a much more self-sufficient home. Get in touch if you are worried about the energy price rises and would like to look at the possibilities of solar panels for your home.
Energy Price Rise for 2024
The energy price cap was implemented by the government back in January 2019 and has remained in effect ever since. Ofgem has a mandate to routinely assess and adjust the cap’s value. Its primary purpose is to strike a balance: enabling energy suppliers to recover their reasonable operational expenses while safeguarding consumers from paying excessive amounts for their energy usage. In accordance with the legal framework, this cap achieves this objective by imposing an upper limit on the rates suppliers can charge for each unit of energy consumed.
The CEO of Ofgem Jonathan Brearley said
“This is a difficult time for many people, and any increase in bills will be worrying. But this rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay. “
He went on to also say…
“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills. We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap. People should weigh up all the information, seek independent advice from trusted sources and consider what is most important for them whether that’s the lowest price or the security of a fixed deal.”
Ofgem New Guidelines for Energy Suppliers
Ofgem has recently introduced new guidelines for energy suppliers, emphasizing the importance of prioritizing inquiries from vulnerable customers in need of assistance. Furthermore, suppliers are expected to take proactive measures, such as reaching out to households missing two consecutive monthly payments or one quarterly payment. The aim is to assess if these customers are facing financial difficulties and, if so, to offer them support, including affordable payment plans or, when suitable, repayment holidays.
Ofgem has also issued a Statutory Consultation on equalizing standing charges for both prepayment meter and direct debit customers. Historically, prepayment customers bore higher standing charges, reflecting the additional costs and resources incurred by suppliers to deliver their services. In October 2022, the government implemented temporary measures to eliminate this ‘PPM premium’ through the Energy Price Guarantee, which remains in effect until April 2024.
Under Ofgem’s proposal, this adjustment would result in approximately £50 annual savings for prepayment meter customers, a reduction of around £45 per year for standard credit customers, but an increase of roughly £20 annually for direct debit customers. Ofgem is eager to gather feedback on these proposals from all stakeholders.
What does this mean for you?
The price cap rising does not mean that your energy company have to rise their prices, it just gives them the ability to do so if they see fit. Speak to your energy company to see what rises you will see from your energy bills.
Renewable energy is saving the stress (and £££s) for homeowners all over the UK, solar panels and battery storage are giving them a self-sufficient home which creates, stores and even sells its energy back to the grid. If you would like to look at possibilities for your home get in touch for a free quote and system design today.
Stay tuned for the next quarterly price cap announcement scheduled for February 2024, which will cover the period from April to June 2024.