Ofgem energy price to be announced on Thursday with crippling rise in costs expected for millions

The energy price cap will be announced by regulator Ofgem tomorrow, revealing what is expected to be a crippling rise in energy bills for millions of households.

Ofgem has brought forward the announcement of the new cap on bills by four days to Thursday 3 February.

The new level will come into force in April and is predicted to be around £1,900 for an average household.

The cap would remain fixed at that level for six months, but could rise even further afterwards.

It would mark a 49% rise from the current price cap, which was already a record high when it was set at £1,277 in October.

The change will affect around 22 million households which are currently thought to be on an energy deal linked to the price cap.

Many of these will likely be put under major financial distress because of the price spike, which has been caused by a manifold increase in global gas prices.

Energy firm loans to cut rising bills

On Wednesday (2 February), the Times reported that ministers are planning to back loans of around £6 billion to energy companies.

The companies would then pass on this money to households, saving them around £200 each in a rebate off their energy bill which will help to offset some of the huge spike in energy costs.

Sources suggested to The Times that the £6 billion figure is considerably smaller than earlier estimates on how much it might cost to help out households through loans. One figure that had been floated was as high as £20 billion.

Ministers have reportedly approved the plans, but the money will be a loan to energy companies and they will be expected to pay it back.

This means that while customers are protected from the worst of April’s price rises, they will eventually be likely to pay the same amount to their energy supplier in the long run.

The plan is also predicated on a fall in the record-high price that energy suppliers are currently paying for the gas and electricity they buy.

If this price does not fall significantly, bills will need to rise further to recoup the loan money down the line.

If prices fall, the scheme would likely mean these drops in wholesale costs will not be passed on to customers until the government-backed loans have been repaid.

Help for poorer households

Ministers will also reportedly announce extra help for poorer households, including an extension of the warm home discount which deducts £140 off electricity bills for winter 2021 to 2022.

Huge rises in energy prices are expected to come alongside an overall spike in the cost of living across the UK, after inflation reached 5.4% in the year to December.

This was likely to spark a crisis in the cost of living for households across the UK, even without a 50% spike in energy bills.

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