Average annual energy bills could hit more than £7,000 by spring next year, according to recent warnings. It comes as Ofgem announced that the energy price cap is set to increase by 80 per cent from £1,971 to £3,549 in October this year.
Recent forecasts have suggested that the energy price cap, which is now being reviewed every three months instead of every six, could then top £5,400 in January, and rise above £7,000 in April, before falling back again in July and October next year. The cap is calculated based on the wholesale price of gas and electricity, which continues to soar amid the ongoing crisis in Ukraine.
Predictions are varied but experts at Auxilione expect the cap to reach £5,405 in January and £7,263 in April, while Cornwall Insight put the price cap slightly lower at £5,387 in January and £6,616 in April. It is the grimmest forecast yet from the two outfits, whose predictions for October’s price cap were close to Ofgem’s decision, with Auxilione’s final forecast just £27 above what the cap was set at.
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Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “While there is still some time until the January and April caps are set, the energy crisis is showing no sign of abating. A key focus for the next Prime Minister and for Ofgem must be protecting consumers, and the wider economy from the impact of this rise."
Chancellor Nadhim Zahawi said the increase in the energy price cap would cause “stress and anxiety” for people, but that the government was working “flat out” to develop more options to support households. However, any announcement on additional support for households will have to wait until either Liz Truss or Rishi Sunak is in No 10 after the Tory leadership contest.
The Resolution Foundation predicted that around four million households in the UK with pre-payment meters will be spending around 44 per cent of their monthly disposable income on bills during the depths of winter, despite the support currently available from the government. According to a report, energy costs might be around £613 during the month of January alone.
Jonny Marshall, a senior economist at the Resolution Foundation, said: “A catastrophe is coming this winter as soaring energy bills risk causing serious physical and financial damage to families across Britain. We are on course for thousands to see their energy cut off entirely, while millions will be unable to pay bills and (will) build up unmanageable arrears."
The think tank has urged the next prime minister to "think the unthinkable in terms of the policies needed to get sufficient support to where it’s needed most". It said additional support should be targeted at those who are least able to cope with rising bills.
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