Energy regulator Ofgem has increased the UK’s energy price cap by 13% from July to September, citing the wholesale cost of gas that's gone up significantly due to the ongoing unease in the Middle East.

The cap limits the amount that providers can charge per kilowatt-hour of domestic electricity and unit of gas, as well as the daily standing charge they can levy. 

Customers on a default tariff who pay for their electricity by direct debit will pay an average of 26.11 pence/kWh, up around 1.6p. The daily standing charge is now 57.19 pence per day. Those numbers are an average of prices across the UK and could be higher or lower depending on your circumstances. 

The changes mean that the average annual household energy bill in the UK is now £1,862. 

America’s attack on Iran has seen wholesale energy costs rise, because of a reduced supply of the raw materials for generation. A summer price rise has a less severe impact because of reduced consumption, but all eyes will be on what Ofgem will decide for the autumn price cap level. 

Prices had been dropping until the trouble in the Middle East that was started by US and Israeli military action that has choked off supply of oil and gas from the world's largest producing region.

How does the price cap work?

The total amount of the price cap – set at £1,641 per year for the period between April and June – is based on an average household consumption. That is, a typical household with both gas and electricity paying by direct debit. 

When is the cap reviewed? 

There are four reviews scheduled in each year, taking place in January, April, July and October. They are typically announced a month or two in advance so that energy providers have time to prepare. 

Why is my bill different to the cap? 

Where you live can make a difference (standing charges are set for each different region of the UK based on a range of criteria), as does how you pay, what fuel you use and whether you’re an average of every household in the UK.

Ofgem has what it calls a ‘typical domestic consumption value’, that takes values from different parts of the energy market to create a value for an average home – it’s intended as a handy reference rather than an energy price gospel. 

How is the cap calculated? 

Ofgem has to decide the price of energy based on the wholesale cost of making the electricity, a bit of money that’s put aside to maintain and upgrade the infrastructure and cover government policies like the warm homes discount, as well as allowing for a bit of profit for the suppliers themselves.