Early predictions show the energy price cap could hit £3,700 next April. The latest forecast from Cornwall Insight, which collects data and makes predictions about the energy market, said the price cap is likely to rise again in five months' time despite current prices already being 95% higher than they were last winter.
The predicted cap is due to come in when the UK Government’s energy price guarantee (EPG) comes to an end. The price guarantee was introduced by then-prime minister Liz Truss and saw the typical energy bill capped at £2,500 per year, but will only last until March 31, 2023, when the government will consider how to support households with their energy bills after that point.
The predicted April figure for a typical home is £3,702, which is £600 lower than the figure previously forecast – £4,348 - but is still more than £1,700 higher than the £1,971 price cap which was in place from April to October this year. It is also 48% higher than the existing price guarantee figure between now and April.
Read more: Millions of households to get extra £500 a year starting this week
Wholesale gas prices have begun to fall after massive jumps resulted in rocketing bills, but analysts believe energy customers are unlikely to benefit from this by April as energy suppliers generally buy their energy in advance meaning they will not be able to pass on the lower wholesale prices to consumers yet. MoneySavingExpert Martin Lewis tweeted about the predictions on Tuesday saying they were "good and bad news."
The price cap is set by energy regulator Ofgem and limits how much suppliers can charge domestic customers on standard variable contracts per kWh of energy used and for daily standing charges. It was replaced by the government's energy price guarantee after Ofgem announced it planned to raise the cap to £3,549 in October, an 80% increase.
It meant a typical household saw their annual bills capped at £2,500, a figure based on Ofgem’s national average consumption rates of 2,900 kWh of electricity and 12,000 kWh of gas. Households that use more energy will be billed more.
Then-prime minister Liz Truss originally said the guarantee would be in place for two years but after sacking chancellor Kwasi Kwarteng she replaced him with Jeremy Hunt, who said it would only last six months. The government will launch a review into how to support those most in need of help with their bills in April 2023.
A number of financial support schemes have been rolled out to help those hardest hit by the cost of living crisis; all households will receive a £400 discount on their energy bills between October 2022 and March 2023. The government is also set to roll out a £324 cost of living payments to those on means-tested benefits in the coming weeks. You can see all the payment dates between now and Christmas here.
After the cap rises to a £3,702 from April to June, Cornwall Insight predicts it will fall to £3,158 from July to September before climbing slightly to £3,182 in October. Although wholesale energy prices have fallen sharply since hitting record highs in late August, energy providers tend to purchase supplies in advance through hedging on the forward market, meaning they will not have been able to take advantage of the reduced prices.
“Despite the [predicted] fall in the price cap from April 2023, the prices remain significantly above the £2,500 EPG levels, which will likely prompt calls for greater government intervention,” Cornwall Insight said.
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