Ofgem confirms £108 energy bill rise: What you need to know

The UK’s energy regulator, Ofgem, has given the green light to a £28 billion investment plan to upgrade the country's ageing energy grid. While the move is designed to boost energy security and support the transition to green energy, it comes at a cost for UK consumers. The upgrades are expected to add £108 to the average annual household energy bill by 2031.

Energy bill increases

The £28 billion investment will be funded through "network charges," which are a component of every energy bill to cover the cost of transporting gas and electricity to your home. According to Ofgem, these charges will increase gradually, reaching a total rise of £108 per year by 2031.

Here is the breakdown of that increase:

• Electricity Network - £60 increase
• Gas Network - £48 increase

However, Ofgem argues that the actual 'net' impact on the amount you pay will be much lower. The regulator estimates that the upgrades will create efficiencies that save around £80 elsewhere on your bill. If these savings materialise, the net increase to your annual bill would be approximately £30 by 2031, or roughly £2.50 a month.

Why is the upgrade necessary?

The UK’s electricity grid was largely built in the 1960s and needs significant modernisation to handle future demand. As we move away from fossil fuels toward renewable sources like wind and solar, the grid must be expanded to transport this clean energy from where it is generated (often out at sea) to where it is used in our homes.

A major driver for this investment is to reduce "constraint costs". Currently, when wind farms generate more electricity than the grid can handle, the National Grid has to pay them to switch off. By upgrading the cables and infrastructure, more of this cheap, green energy can reach households, potentially lowering wholesale costs in the long run.

Jonathan Brearley, CEO of Ofgem, said: "The investment will support the transition to new forms of energy and support new industrial customers to help drive economic growth and insulate us from volatile gas prices."

Why do consumers have to pay?

Ofgem insists that doing nothing is not an option and would eventually cost consumers more. The regulator has stated it will hold network companies accountable, ensuring that funds are only released when needed and "clawed back" if not used efficiently. However, the increase comes at a difficult time for many households already grappling with high standing charges and the confirmed 0.2% rise in the January 2025 Price Cap. Critics and campaigners have previously raised concerns about "hidden costs" in standing charges, and this new investment will likely keep those fixed daily costs high for the foreseeable future.

What can you do about rising bills?

While you cannot avoid network charges, you can still take steps to manage your overall energy costs.

• Check your tariff - With prices fluctuating, it is worth checking if a fixed-rate tariff could offer you stability or savings compared to the price cap.
• Energy efficiency - Simple changes, such as improving insulation or adjusting your boiler flow temperature, can reduce the amount of energy you use, lowering the variable part of your bill. We explain more in our article 'What to do if you are struggling with paying your energy bill'.
• Monitor grants - Keep an eye out for government schemes designed to help with energy efficiency improvements, especially if you are on a low income.