Experts have warned millions of households across the UK that they could soon see a rise in their energy bills.
The Ofgem price cap sets the maximum amount energy suppliers can charge you for each unit of gas and electricity you use, along with the standing charges. It's reviewed by regulator Ofgem every three months and is supposed to be adjusted in line with the wholesale cost of energy.
It used to be changed only twice a year - in April and October - but was changed to quarterly in 2022 due to the chaos surrounding the cost of wholesale energy. Ofgem has changed its methodology of how it calculates the price cap, due to people using less gas and electricity to save money.
As of October, the price cap sits at £1,834 a year (£1,923 under the old methodology) for a typical dual fuel home paying by direct debit. This figure is based on what an average household that uses gas and electricity would pay based on the rates allowed under the cap.
However, bills are expected to rise again as forecasts by energy analysts Cornwall Insight suggest that typical bills will rise to £1,897 a year (£1,996 under the old methodology) from January 1. Ofgem will announce its next price cap ono November 23.
The price cap has risen significantly over the last two years because of soaring wholesale gas costs. In 2021, nearly 30 energy providers in the UK collapsed and the price of wholesale gas got even worse when Russia invaded Ukraine last year.
As a result of the conflict, the price cap shot up as a way to compensate for wholesale prices. However, pressure has mounted on wholesale prices once again due to the conflict between Israel and the Governing body of the Palestinian territory of Gaza, Hamas. Israel shut down its offshore Tamar gas field when the conflict began at the start of this month which could have an impact on wholesale prices going forward.
Alongside this, Cornwall Insight also pointed out that Australian gas workers were set to restart strikes at the Gorgon and Wheatstone gas plants, with their industrial action causing a rise in wholesale prices in September.
These world issues may not impact prices at the moment, however, they could do in the coming few months. This is because energy suppliers usually buy their wholesale gas months in advance for when they will need it. This means that our current monthly bills do not reflect today's prices, but rather the wholesale cost from when the supplier first paid for the energy.