Household energy prices in the UK are poised for a significant increase in July, marking the first rise since April, as soaring wholesale costs linked to the Iran war impact consumer bills. The energy regulator, Ofgem, is expected to announce a new price cap on Wednesday, which will affect millions of homes across England, Scotland, and Wales on variable tariffs.

Analysts are forecasting a substantial jump of approximately 13% in the current price cap. This adjustment would translate to an additional £209 per year for a typical household using average amounts of gas and electricity, bringing their annual energy expenditure to an estimated £1,850.

The upcoming price cap announcement arrives amidst a record-breaking heatwave gripping much of the UK. However, energy experts suggest that proactive measures taken now can help consumers mitigate higher bills later in the year. The price cap, which is reviewed and set every three months, had previously seen a 7% decrease between April and July, following government-led changes to charges implemented just before the conflict in Iran escalated.

The forthcoming cap from July to September will directly reflect a 25% surge in global gas prices, a consequence heavily attributed to the ongoing conflict and the resulting effective closure of the Strait of Hormuz. Wholesale prices, which form a significant portion of energy bills for suppliers, account for roughly 40% of a household's gas and electricity expenses.

Some energy suppliers have cautioned that prices could escalate further by autumn and winter, periods typically characterized by increased domestic energy consumption. In response, the government has indicated that it is developing plans to offer targeted financial support to vulnerable households before energy bills become even more burdensome during the colder months.

This projected increase comes at a time when typical households are already enduring annual energy costs around £600 higher than before the price shocks experienced in 2022-23. The situation is further complicated by billions of pounds in unpaid bills owed to suppliers, and the specific needs of individuals with disabilities who rely on energy-intensive specialist equipment year-round.

The energy price cap currently extends to approximately 19 million households in England, Wales, and Scotland, with Northern Ireland operating under different regulatory and billing structures. The cap dictates the maximum charge for each unit of gas and electricity for consumers on variable tariffs. Those on fixed-rate tariffs are unaffected by these changes until their contract concludes.

Ofgem calculates the price cap based on the annual bill for a representative household consuming 11,500 kWh of gas and 2,700 kWh of electricity annually, consolidated into a single bill settled by direct debit. The regulator is also reportedly reviewing its assumptions about typical energy consumption levels, acknowledging that many households have reduced their energy usage.