Energy price cap: Will bills rise again this winter - and is now the time to fix?

The Ofgem energy price cap has risen from £1,568 to £1,717 a year for the average dual fuel household paying by direct debit - but will energy bills rise again this winter?

Millions of households saw their energy bills rise again this week - but will they go up again this winter?

The Ofgem energy price cap has risen from £1,568 to £1,717 a year for the average dual fuel household paying by direct debit. The Ofgem price cap does not put a limit on how much you can pay for energy - instead, it sets a limit on unit rates for gas and electricity, as well as the standing charges, which is what you pay to be connected to the grid.

This means if you use more energy, you’ll pay more - or use less, and you’ll pay less. As the price cap has increased by around 10%, it means someone who pays around £100 for energy each month will see their bill rise to £110. Many households will understandably be worried about further increases to come - especially after the Winter Fuel Payment eligibility was watered down dramatically, meaning ten million fewer pensioners will receive it.

Will energy bills rise again?

Ofgem updates its price cap every three months - so it will change again on January 1. Energy analysts at Cornwall Insight are currently predicting the January energy price cap will fall by 1% from £1,717 to £1,697 a year for the typical household. Ofgem will announce its price cap for January by November 25. We are around half way through the assessment period Ofgem uses to decide its price cap, which means predictions will change over the next few weeks.

The assessment period for the January price cap is August 19 to November 15, 2024. Ofgem uses lots of different factors to decide its price cap - the largest being the cost of wholesale energy. Other elements include things such as the cost of maintaining pipes and wires that carry gas and electricity, network and operating costs. It also looks at VAT, payment method allowances and profits for the energy supplier.

What is the Ofgem price cap?

The Ofgem price cap sets a limit on unit rates for gas and electricity, as well as the standing charges. Ofgem calculates its headline price cap figure based on how much energy the typical household uses across England, Scotland and Wales. It estimates the average household consumes 2,700 kWh of electricity and 11,500 kWh of gas over 12 months.

But keep in mind that unit rate prices also vary by region, and also by how you pay for energy - so if you're a direct debit, prepayment, or pay on receipt of bill customer. For someone paying by direct debit, the unit rate for gas is to 6.24p per kWh and the standing charge is 31.66p per day. The unit rate for electricity is 24.50p per kWh and the standing charge is 60.99p per day.

Around 27 million people are covered by the price cap. You are covered by the price cap if you're on a "default" or standard variable rate (SVR) tariff. You'll be on an SVR tariff if you're not locked into a fixed deal, or you didn't switch to a new tariff when your previous fix expired. You may also roll onto an SVR tariff when you move home, or if you're moved to a new energy supplier if your existing one has gone bust.

Should I fix into an energy deal now?

MoneySavingExpert.com founder Martin Lewis this week issued an urgent message for households to consider fixing into an energy deal now. In the latest MoneySavingExpert.com (MSE) weekly email, Martin explained how the best fixes are even slightly cheaper than the previous July price cap.

He said: "You can lock in for a year and you won't face the 10% rise. This is the MAIN OPTION for most people right now." MSE has flagged the cheapest energy fixes - the top one of which, the Outfox the Market Outfox the Price Cap (Oct 24) Fix'd Dual v2.0, is 9.4% cheaper on average than the October price cap.

The next two cheapest on the MSE list are the EDF Essentials 1yr Oct25v3 and the British Gas Fixed Tariff 12M v8, which are both 8.9% cheaper. The Octopus 12M Fixed October 2024 v1 and E.on Next Fixed 12M v28 are 8.8% less than the October price cap, while the Ovo 1 Year Fix & 1 Year Loyalty Fix is 8.7% less.

Martin said: "It's predicted that over the next year you'll pay roughly 1% less than the current price cap... so all the fixes above have a lot of wriggle room for things to change and them still to be cheaper than staying on the cap." Again, if you lock into a new energy deal, what you're fixing is the unit rates you pay for gas and electricity - so if you use more energy, you'll pay more, or use less, and you'll pay less.

Another option flagged by MSE is a discounted price cap tracker tariff, which are variable deals that move in line with the Ofgem price cap. The EDF Ensure 1yr tracker offers £50 cheaper standing charges compared to the price cap, which MSE says makes it a good deal for low energy users. The E.on Next Pledge 1yr tracker comes with unit rates that are about 3% under the price cap for 12 months.