Energy Prices Are Increasing This January

Ofgem has announced that it will increase the next energy price cap from £1,717 to £1,738. This means that from 1 January, electricity and gas customers' So Flex and So Flex Green variable tariff rates will change to reflect this. As always, we’re on hand to explain why prices are increasing and how we can support you during this change.

What is the energy price cap and how does it work?

The energy price cap acts as protection for households with variable tariffs by setting the maximum amount they can be charged for units of energy. Ofgem created this to ensure that people on variable tariffs are not being overcharged, and to provide financial protection. But this does not mean lowering your bills, but rather protection from sudden changes in price. The cap decreased in April and July 2024 but increased in October.

The price cap is a dynamic figure that is adjusted every 3 months based on the wholesale energy market. If you are on a variable tariff, your prices will change accordingly. If you’re on a fixed tariff, your prices will remain the same.

It’s important to note that the price cap limits how much you are charged for your rates, not your overall energy usage. So if you use more, you’ll be charged more.

Why has the price cap increased?

We understand it will be disappointing to learn that energy prices are going up again. As wholesale energy prices have gone up, this means the cap also increases. Wholesale energy prices are at their highest in the winter and have continued to be exacerbated by the war in Ukraine and Russia. There is also the added uncertainty that has arisen following the recent USA election, with many unsure of how this new government may impact global wholesale prices.

Ofgem has stated that we shouldn’t expect energy prices to return to pre-2022 levels and that volatile gas prices are likely to persist as a long-term issue. Cornwall Insight has also predicted that prices will begin to decrease come April 2025, but that wholesale prices will remain high.

Is there any support available?

There is some support available for those who may be struggling at this time. The warm home discount is a £150 reduction on your bills if you are receiving either universal credit, housing benefit, or the guarantee credit element of pension credit. You will receive this automatically if you are eligible by 31 March 2025. You can find out more about the warm home discount here. We’ve also provided information regarding other help you could receive in our recent blog.

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