Energy price cap in Great Britain to rise by 13% from July

Households in Great Britain are set to see their energy bills jump by nearly 13% from July, as the industry regulator Ofgem raises its quarterly price cap to an average of £1,850 a year. The increase, which adds £209 to a typical annual bill, follows a surge in wholesale gas prices triggered by the Iran war, according to analysis by the energy consultancy Cornwall Insight.

The new cap, which takes effect from July 1 and runs through the end of September, is a significant blow to millions of families already struggling with the rising cost of essentials such as council tax and water. Under the cap, households paying by direct debit will see electricity charges rise from 24.67p per kilowatt hour to 26.11p, while gas charges increase from 5.74p to 7.33p per kWh.

What is driving the increase?

The main driver is the sharp rise in wholesale energy prices, which climbed in February and March after Tehran effectively cut off Gulf energy supplies by shutting the Strait of Hormuz in response to US-Israeli strikes on Iran. According to Cornwall Insight, the UK's gas market price has doubled since the start of the year, and despite a temporary ceasefire that allowed markets to retreat from the historic highs of March, prices remain well above normal levels.

Ofgem sets the maximum price per unit of gas and electricity based on the average wholesale costs in the months leading up to each new cap. The regulator also includes the maximum daily standing charge—the flat fee for connection—in its calculation.

Concerns for the winter

While the summer rise will be painful, experts warn that the bigger concern is the October cap, when households typically use more energy as the weather turns colder. Cornwall Insight said that even if the Iran war ended tomorrow, the physical damage to infrastructure and lingering supply disruptions mean a fall back to April's price cap levels in the autumn looks unlikely.

Craig Lowrey, principal consultant at Cornwall, said that if the cap stays at a similar level in the autumn, the government will need to think seriously about targeted support for the most vulnerable. He told reporters that the expected rise is "a kick in the teeth" for households already dealing with the cost-of-living crisis.

The predictions have intensified calls on ministers to act. Campaigners have expressed disappointment that the chancellor's recent cost-of-living package did not include direct help for energy bills.

Government response

Chancellor Rachel Reeves last week announced a package of measures aimed at cutting the cost of living, but so far has not offered support for domestic energy costs. Speaking to MPs on Thursday, she said Treasury officials were working on contingency plans ahead of the winter, but stressed that any support scheme would be "targeted and temporary."

Instead, the chancellor unveiled what the Treasury is calling "Great British summer savings" — reducing VAT on tickets for attractions and children's meals. The savings are due to come into effect a few days before the energy price rise, to coincide with the start of the school summer holidays.

Simon Francis, of Fuel Poverty Action Campaign, said: "We had hoped that the predictions of a huge rise in the price cap could have been the moment for ministers to show they are prepared to go further and faster in their determination to bring down bills."

Record household debt

The rise comes as household energy debt has reached record levels. Earlier this year, unpaid energy bills hit £4.5bn, a figure that is expected to grow as the new cap takes effect and winter approaches.

Ofgem's price cap was introduced in 2019 to protect consumers from excessive charges, and it is updated every three months to reflect changes in wholesale prices. The system has faced criticism for leaving households exposed to volatile international markets, but the regulator has defended the cap as the best available mechanism to pass on costs.

Energy analysts note that the current crisis is the result of geopolitical events beyond the UK's control. The war in Iran has caused the biggest energy supply shock on record, choking exports from the Gulf, while the earlier Russian invasion of Ukraine had already disrupted European gas supplies.

For now, households are bracing for a summer of higher bills, and the prospect of further increases in the autumn. As the government weighs its options, campaigners and industry experts are urging swift action to protect those least able to absorb the additional costs.