Millions of households across the UK are set to face higher energy costs from the New Year, with some paying over a hundred pounds more than the official price cap. Customers of major suppliers including British Gas, EON, EDF, OVO, and Octopus Energy are affected.
What the January Price Cap Change Means for Your Bill
The regulator's price cap, which limits what suppliers can charge per unit of energy, will see a modest average increase of 0.2% from Thursday 1 January. However, due to the structure of the cap and higher winter usage, the actual annual cost for many will be significantly greater.
For a typical dual-fuel household paying by monthly Direct Debit—the most common method—the average annual bill will be £1,758. Those using prepayment meters will see an average yearly cost of £1,711, while customers who pay on receipt of their bill face the highest average at £1,894 per year.
Experts from Martin Lewis's Money Saving Expert team and comparison service Uswitch have warned that the real-world impact will be steeper. They highlight that some households could end up paying around £136 more than the cap level due to increased consumption during the colder months.
Why Bills Are Rising Despite Falling Wholesale Costs
Interestingly, this increase is not driven by rising wholesale energy prices, which actually fell during the assessment period. Instead, the hike is attributed to growing policy and network costs added to electricity bills.
Martin Lewis explained the situation, stating: "These changes are not caused by an increase in wholesale costs... but by a mix of policy and network costs, such as the cost for nuclear, costs for linking up networks, and the cost of the Warm Home Discount."
He further noted a policy paradox: "Electricity is seen as more universal, so when they want to add policy costs to bills, they do it there... we see a relative increase in electricity costs compared to gas, when the whole policy driver is to move people off gas." This means customers with high electricity use could see their bills jump by 3% or 4%.
Take Action Now to Cut Your Costs
Consumer champions are urging households not to accept the standard variable tariff. Ben Gallizzi from Uswitch advised: "There are fixed deals available to switch to that can save around £150 a year against the price cap. If you have the option of getting off a standard variable tariff and ditching the price cap, it's worth doing that now."
The key message for consumers is clear: do not assume you are on the best deal. Comparing energy tariffs could lead to substantial savings, especially as fixed-rate contracts are currently offering better value than the default price-capped rates for many.
