Energy prices are rising by 5% in January: find out how much more you'll pay

Gas and electricity customers face a 5% increase to their bill from January 2024, it was confirmed this morning.

The energy price cap on variable tariffs is going up after it dropped in October.

The increase is driven 'almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine', says the energy regulator Ofgem, which sets the level of the price cap.

Prices are still higher than before the energy crisis and most people won't get government support this winter.

The price cap isn't a limit on your total bill. So what you pay still depends on how much you use. It also doesn't affect you if you have signed up to a fixed deal.

Find out more: what is the energy price cap?

How much will I pay for energy in January 2024?

You might have heard the figure £1,928 quoted. This is the average amount that a household would pay per year using a 'medium' amount of energy under these new rates. It works out at around £161 per month. At the moment, the same typical household pays just under £153 a month.

Ofgem explains that medium use is 11,500kWh gas and 2,700kWh electricity per year. So if you use more or less than this, what you pay will be different. 

Prices also vary by region and by how you pay. Direct debit and pay-as-you-go customers pay a similar amount. It costs more to pay when you receive a bill.

It's more accurate to estimate how much you might pay based on the average unit rates and standing charges. Between 1 January and 31 March 2024 these are going to be:

• Electricity unit rate: 28.62p per kWh
• Electricity standing charge: 53.35p per day
• Gas unit rate: 7.42p per kWh
• Gas standing charge: 29.6p per day.

These are slightly higher than current rates. 

Bear in mind that these prices will be in place for three months, after which they will change again. They are predicted to fall slightly in April.

Use our energy bill calculator to estimate your spend for the next year, based on industry predictions for future price changes.

Why is the energy price cap increasing?

The rising cost of wholesale gas and electricity is the main reason the price cap is going up, Ofgem explains.

Besides the conflict in Ukraine, wholesale energy prices have been affected by disruptions to supply from Finland, the Israel-Hamas conflict and strikes at gas production works in Australia according to energy consultancy Cornwall Insight.

Mild winter weather has meant that wholesale gas prices have dropped slightly in recent weeks.

This hasn't filtered through to bills yet, but might do later in 2024 depending on where prices go.

Find out what the changes mean for how much your appliances cost to run

Will the energy price cap rise again in future?

The price cap is expected to drop slightly for April to June 2024, drop again for July to September, and then increase again for next winter. 

That's according to energy consultancy Cornwall Insight.

It expects that January to March will be the priciest three months of 2024, though it depends what happens in the meantime, and predictions may change.

However electricity standing charges (the daily amount you pay, regardless of how much power you use) are predicted to increase by around 8p per day from April 2024.

They have already doubled between 2021 and 2023, according to Ofgem. That's because energy suppliers have to pay more fixed costs (such as network costs) and recoup the cost of other energy suppliers going bust. They typically pass these costs onto customers in their standing charges.

Unit costs (the price per kilowatt hour of electricity) are expected to drop, but Ofgem predicts that around 1.2 million low-income households would be worse off after the change.

Ofgem is currently consulting with experts on the energy industry on how the standing charge could be changed for the future.

How to get help if you're struggling to pay your energy bill

How can I pay less for energy?

If you don't have a smart meter, take a meter reading on or close to 31 December and send it to your energy supplier. This will help make sure that you don't overpay for energy you use before the new price cap takes effect.

Try our other tips to keep your bills in check:

• Pay by direct debit if you can. It's usually the cheapest way to pay for energy. Prepayment customers currently pay a similar amount but it's expected to increase in March 2024 when current protections end. There is a higher price cap for those who pay when they receive a bill.
• Check your account from time to time to make sure your meter readings are getting through and you're not being charged based on estimates.
• Question direct debit changes if you don't agree. You can ask your energy firm to explain how and why it has calculated the change.
• Use your appliances more efficiently: do your laundry at 30°C, only run the dishwasher when it's full, use eco settings where available, defrost food in your fridge and wait for food to cool before freezing it.

Read more tips in our 10 ways to save on energy bills.