Energy prices increase by 5%

Initially announced in November 2023, the Energy Price Cap has now increased by 5% effective from 1st January 2024.

For the next three months, until 31st March 2024, energy customers on variable tariffs protected by the price cap can expect to pay an average bill of £1928 per year.

While this is an increase from the previous quarter's cap of £1834 per year, experts are already predicting a drop of 14% for April.

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Increased bills

The increase in the price cap comes as the UK's weather reaches its coldest months and is mainly attributed to the rise in wholesale gas prices seen in October.

While the amount customers pay will vary depending on their usage, as well as exactly in the country they live and the type of meter they have, the average user paying by Direct Debit will see their annual bill rise from £1834 to £1928.

Average electricity rates are increasing to 28.62 pence per kWh, with an average daily standing charge of 53.35 pence.

Gas rates are increasing to an average of 7.42 pence per kWh, with an average daily standing charge of 29.60 pence.

While customers are seeing a small average decrease in the standard charge for both electricity and gas, the usage fees are increasing across both utilities.

Upcoming predictions

Despite this latest rise in energy prices, research and analytics firm Cornwall Insight is predicting a decrease in prices over 2024, with bills dropping by as much as 18% by next Autumn, with bills potentially as low as £1640 by next winter.

The April 2024 to June 2024 price cap predictions are the most reliable, with prices expected to drop by 14% to £1660 in the next review.

This will see decreases to average usage fees of both gas and electric by 1.46 pence for gas, and 4.53 pence for electric.

While slightly less reliable due to predicting costs further into the future, Cornwall Insight also predict prices to continue to decrease in the Q3 review, with prices falling by a further 4% to £1590 on average.

In Q4, which is October 2024 to December 2024, the analytics firm then predict prices will increase slightly by just 3% to £1639, leaving them around 15% lower than current prices.

Should I switch?

For customers on variable energy deals protected by the price cap, the general consensus, which is usually echoed by Ofgem, is for customers to stay on these deals as they ensure customers won't pay more than the price cap.

However, there are a small increasing number of fixed deals being made available on the market, especially for existing customers, so should people consider switching?

With prices currently expected to fall by a fair amount over the coming year, it's arguably better for customers to stay on their existing energy deals, as variable tariffs can't be priced above the price cap, while fixed deals can.

Fixed energy deals also mean customers won't benefit from any decreases to the price cap, as the energy rate they pay is fixed for a period of usually around 12 months, and customers could be subject to exit fees if they want to switch before this.