UK energy bills rise 4% as Middle East conflict drives up gas costs

The average annual dual-fuel energy bill in the United Kingdom is set to increase by 4% for the coming autumn and winter period, according to the energy regulator Ofgem. The rise will push the typical household bill to £1,723 per year, up from the previous cap of £1,663. This represents an annual increase of £60 for the average customer. Ofgem attributed the price hike primarily to higher wholesale gas prices resulting from the ongoing conflict in the Middle East. The regulator noted that volatile global gas markets remain the dominant driver of these changes, with gas imports restricted in the Strait of Hormuz contributing to rising liquefied natural gas prices.

The government has introduced measures to mitigate the impact on consumers, including the removal of value added tax on electricity bills from October. Energy Secretary Miatta Fahnbulleh stated that this move was designed to provide families with some breathing space and has limited the overall rise in the price cap. Ofgem confirmed that the 5% VAT reduction introduced by Chancellor John Healey is reflected in the new cap, noting that without this intervention, bills would have been £45 higher. However, the VAT relief is currently funded only for the current financial year, running through to April. While the government has also removed 75% of the Renewables Obligation from domestic electricity costs, industry leaders argue that these measures are insufficient for long-term relief.

Energy suppliers and analysts have criticised the current policy framework, suggesting that more ambitious action is required to permanently lower bills. Good Energy chief executive Neil Pocklington described the current approach as akin to patching a leaking pipe without fixing the source. He argued that breaking the link between gas and electricity prices and making UK renewables cheaper could reduce bills by £270 a year in the long term. Similarly, EDF has predicted that average household bills will rise further without an extension of government support. The company’s analysts have called for the VAT cut to be extended and for legacy renewables subsidies to remain in general taxation. They estimate that if the VAT and Renewables Obligation changes were to persist, they could reduce bills by around £90 per dual-fuel customer by 2030.

The debate over the adequacy of government intervention has become a point of political contention. Shadow Scottish Secretary Andrew Bowie MP accused the Labour government of failing to deliver on its promise to cut energy bills by £300, arguing that bills are instead on track to be £400 higher. He warned that the country is being pushed toward greater reliance on imported energy, leaving households exposed to global price shocks. In response, the government has doubled down on the Warm Home Discount, which has been expanded to six million households. Energy Secretary Fahnbulleh highlighted that this follows the removal of £150 in costs from bills earlier in the year. However, Good Energy has recommended increasing the discount by £300 to £450, arguing that the current amount is not high enough to provide adequate support.

Industry experts have also raised concerns about the structural issues within the energy market. Unite, the union, called for a complete overhaul of the sector, advocating for public ownership to drive down bills and end what it describes as profiteering. The union’s report highlighted that energy companies made £30 billion in profits in 2024 alone. Meanwhile, insolvency specialist Molly Monks at Parker Walsh warned that the price cap does not represent a maximum limit on what households can pay. She explained that the cap limits the rates suppliers can charge on default tariffs, but households that use more energy will still pay more. Ofgem noted that prices remain 52% below the peak of the energy crisis in 2022, but are still 46% higher than in 2019. The regulator added that electrified homes that do not use gas should experience a smaller increase, estimated at 1%, as electricity prices remain broadly stable due to the temporary VAT removal.