Shock winter rise to energy bills will leave Brits paying £1,758 per year
Major forecasters Cornwall Insight had predicted a 1% drop - but the energy regulator has moved in the opposite direction.
Household energy bills will rise by 0.2 per cent from January after Ofgem raised its next price cap, despite wholesale energy costs falling since August.
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The regulator said energy bills will rise by about 28p a month for the average dual-fuel household in England, Scotland and Wales.
This amounts to an average overall bill of £1,758 per year for those on a default tariff, up from the current £1,755 cap.
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The increase comes as a shock to many, after major forecasters Cornwall Insight predicted prices to fall by 1% because of lower wholesale energy prices.
Ofgem said wholesale prices were currently stable and had fallen by 4% over the past three months, but that conditions remained “volatile” due to events around the world.
It added that the price cap change is driven by government policy costs and operating costs.
This includes funding government’s Sizewell C nuclear project - around £1 per month - which will bring more clean power.
Households are also using more energy on average, while temporary costs related to the extension of the Warm Homes Discount scheme have also played a part in the cap rising.
Tim Jarvis, director general of markets for Ofgem, said: “While energy prices have fallen in real terms over the past two years, we know people may not be feeling it in their pockets.
“The price cap helps protect households from overpaying for energy. But it’s only a safety net and there are practical ways that customers can pay less for their energy.
“While wholesale energy costs are stabilising, they still make up the largest portion of our bills which leaves us open to volatile prices.”
The cap is the typical sum most households pay for gas and electricity when paying by direct debit.
Those on fixed-rate deals will see no change until their current term expires.
The price cap limits the amount suppliers can charge per unit of energy and is revised every three months.
Each households' actual annual bill will be different depending on how much energy you use.
Ofgem has encouraged people to shop around for a fixed tariff deal, with some having to potential to "save more than £200 compared to the upcoming price cap level".
Eight million customers pay by standard credit but could be making savings of £135.60 with the switch.
"That could include tailored repayment plans, which can help households regain control and avoid falling further behind, or providing emergency credit to reduce the risk of self-disconnection," Ofgem says.
Minister for Energy Consumers Martin McCluskey said: "We know that energy bills remain too high. That is why we are taking immediate action, with millions more families receiving £150 off their bills through the expanded Warm Home Discount scheme this winter.
"We are taking the long-term action needed to bring down bills for good with the government’s clean power mission. We are also delivering our new golden age of nuclear, with cheaper, clean electricity to power millions of homes, kick-start economic growth and create thousands of jobs.”