THE UK Government is facing calls to take “immediate action” after projections said the energy price cap could be set to rise to more than £1700 a year.
On Friday, Ofgem will announce the price cap for October to December, and experts at energy consultancy Cornwall Insight have projected a 9.3 per cent rise.
As it stands, the price cap – which sets a limit that suppliers can charge per kilowatt hour (kWh) – is set at £1568 per year, but Cornwall Insight said it could rise to £1714.
The group said there is also likely to be a further “modest” increase in January 2025, with more rises possible early in the new year due to “recent tensions in the Russia-Ukraine war”.
The price cap does not limit a household’s total bills because people still pay for each unit of gas and electricity they use – the figures provided are calculated for an average-use household and if more energy than average is used, a household will pay above the cap.
Craig Lowrey, principal consultant at Cornwall Insight, said: “Following two consecutive falls in the cap, I’m sure many hoped we were on a steady path back to pre-crisis prices. However, the lingering impact of the energy crisis has left us with a market that’s still highly volatile and quick to react to any bad news on the supply front.
“Despite this, while we don’t expect a return to the extreme prices of recent years, it’s unlikely that bills will return to what was once considered normal. Without significant intervention, this may well be the new normal.”
Lowrey added: “Immediate action is needed to ease the financial burden on households – such as the introduction of social tariffs, or reform of the price cap – but that’s only part of the solution.
“We must also develop a long-term strategy to secure our energy future. This means a fundamental overhaul of our energy system, with a strong emphasis on increasing domestic energy production.”
Simon Francis, coordinator of the End Fuel Poverty Coalition, said that the “reality is that bills will go up compared to today and will be around 65% higher than they were before the energy bills crisis started”.
“But instead of offering help, the Government has axed Winter Fuel Payments to millions and refuses to confirm if the Household Support Fund will be extended,” he went on.
“Not only do we need to see urgent movement on both these issues, but we need to see action to reduce energy debt and changes in the rules to reset Britain’s broken energy system so it is on the side of consumers.”
And Adam Scorer, the chief executive of National Energy Action (NEA), said that if Cornwall Insights “alarming estimates are confirmed by Ofgem on Friday, energy bills and energy debt will stretch household finances beyond breaking point”.
He went on: “Households will go into winter with less support and higher prices. This can still be avoided if the UK Government and Ofgem act urgently to directly reduce customer debt levels and energy prices for those most in need.”
Ofgem changes the price cap every three months based on several factors, the most important of which is the price of energy on wholesale markets.
Ofgem is currently considering the future of price protection, including the suitability of the price cap and a potential permanent ban on so-called acquisition tariffs – cheaper prices for new customers to lure them away from their existing supplier.
