UK energy bills forecast to hit £4,266 a year from January | Energy bills
Pressure is mounting on the government to announce a fresh support package for struggling households as energy bills are now forecast to top £4,200 from January.
The consultancy Cornwall Insight said on Tuesday that it expected the energy price cap to reach £4,266 a year for the first three months of next year.
The consultancy forecasts that bills could hit £4,426 in the second quarter of next year before easing. Only a week ago Cornwall Insight predicted the energy price cap was on track to rise to £3,615 a year from January.
Cornwall Insight said rising wholesale prices and a revision of the methodology used by the regulator Ofgem to calculate the price cap were behind the increase in its forecasts.
The consultancy’s principal consultant, Dr Craig Lowrey, said: “It is essential that the government use our predictions to spur on a review of the support package being offered to consumers.”
The consultancy now expects the cap to hit £3,582 from October, an increase of £200 on its last forecast. It expects bills to begin easing next summer, to £3,810 in the third quarter and then £3,781 in the final three months of next year.
The cap, which is set quarterly by the energy industry regulator, Ofgem, was at £1,400 a year as recently as October last year.
The former chancellor Rishi Sunak announced a £15bn support package for consumers in May, including £400 for every household. However, rising wholesale prices have since threatened to wipe out the impact of that support and Sunak and his Tory leadership rival, Liz Truss, are under pressure to announce further measures.
Lowrey said: “If the £400 was not enough to make a dent in the impact of our previous forecast, it most certainly is not enough now.
“The government must make introducing more support over the first two quarters of 2023 a number one priority. In the longer term, a social tariff or other support mechanism to target support at the most vulnerable in society are options that we at Cornwall Insight have proposed previously. Right now, the current price cap is not working for consumers, suppliers, or the economy.”
Ofgem is planing to adapt the formula used to calculate the price cap in October in an effort to allow suppliers to better manage the risk from volatile wholesale prices and prevent higher prices for consumers as a result of suppliers going bust.
The regulator is attempting to prevent a repeat of events last year, when nearly 30 suppliers collapsed, in part due to a rise in wholesale energy prices.
Lowrey said the change in the formula had led to an increase in its predictions. However, he said the move would protect suppliers struggling with costs and prevent the cost of their collapses being added to consumers’ bills.