Energy bills are rising for millions of households in England, Scotland, and Wales as the new year begins, following a slight increase in the energy price cap by Ofgem. The regulator's decision, effective immediately, will raise prices for those on variable tariffs by 0.2%, equating to an approximate 3% annual increase for a household with typical gas and electricity consumption, according to Kevin Peachey, cost of living correspondent.

Campaigners have expressed concern that this increase, though small, coincides with the coldest period of the year, potentially exacerbating financial strain on billpayers during the winter months. The price cap, set by Ofgem, dictates the maximum price per unit of gas and electricity for consumers on variable tariffs. It does not cap the total bill amount, meaning higher energy consumption translates to higher costs.

Ofgem illustrates the cap's impact using a household consuming 11,500 kWh of gas and 2,700 kWh of electricity annually, paying via direct debit for a combined gas and electricity bill. Such a household would see an annual bill increase from 1,755 to 1,758. However, actual energy consumption varies significantly among households.

The energy price cap is a mechanism designed to protect consumers from excessive energy prices. However, critics argue that even with the cap, energy bills remain high, especially for low-income households. The upcoming changes announced in the Budget are expected to bring some relief, with a projected decrease in energy costs starting in April.