Experts predict that the average household energy bill will increase by £146 in October, according to energy consultancy Cornwall Insight. This represents a 9% rise from the current average of £1,568 to £1,714 a year when the latest price cap change takes effect. This figure is lower than the group’s previous forecast in June, where they estimated a 9.9% increase to £1,723. However, they warn of a possible further increase in January 2025, with potential spikes earlier in the year due to recent tensions in the Russia-Ukraine war.
The upcoming announcement of the energy price cap for October to December by regulator Ofgem on Friday at 7am has generated concern for households as they enter the colder months. Craig Lowrey, principal consultant at Cornwall Insight, stated, “This is not the news households want to hear when moving into the colder months.” He adds that after two consecutive decreases in the cap, many were hoping for a return to pre-crisis prices. However, the energy crisis has resulted in a volatile market that quickly reacts to any negative news regarding supply.
The price cap, which was introduced by the government in January 2019, is adjusted every three months based on various factors, including the wholesale market price of energy. It sets a maximum price that energy suppliers can charge consumers in England, Scotland, and Wales for each kilowatt hour (kWh) of energy used. However, it does not limit the total bill of a household as it is calculated for an average-use household. Any usage above the average will result in a bill higher than the cap.
The issue of rising energy prices has prompted Ofgem to consider several reforms to protect consumers in the future. These include the effectiveness of the price cap and a proposed permanent ban on acquisition tariffs, which offer cheaper prices to new customers to entice them away from their current supplier. Cornwall Insight has also called for reform of the price cap or the introduction of social tariffs. They stress the importance of long-term solutions to secure the country’s energy future, such as a fundamental overhaul of the energy system and an increase in domestic energy production.
The government has promised a decrease of £300 per year in household bills with the introduction of their new publicly-owned firm GB Energy. However, Prime Minister Sir Keir Starmer has not provided a timeline for when this decrease will occur and acknowledges that the scheme will take time to develop. The news of the impending price cap increase serves as a reminder of the need for long-term solutions to address the issue of rising energy bills.
