Expect Even Higher Bills This Year, Analyst Warns
Higher energy bills starting in July will be unwelcome news for most households, but leading analyst Cornwall Insight cautions that "the more pressing concern will be what follows."
The firm's forecast for the October to December period projects the price cap at £1,899 per year, representing a further 2% increase on the July cap, coinciding with the onset of colder weather. The October cap will not be confirmed until August.
Dr Craig Lowrey, principal consultant at Cornwall Insight, states:
"The rise in July energy prices will be felt across households already stretched by the cost of living, and even though it was widely anticipated, that does not make it any easier to bear. Even more concerning is October, where our forecasts are already pointing to a slight rise landing just as people start to turn their heating back on for winter.
A lot of people assume that if the conflict in the Middle East ended tomorrow, prices would return to their pre-conflict levels fairly quickly. However, that may be overly optimistic. The damage to infrastructure, the disruption to supply chains and the erosion of market confidence will not unwind overnight, and the impacts could be felt in bills for longer than many expect.
That uncertainty makes the outlook for October particularly hard to call. We are only days into the three month time period Ofgem uses to set the wholesale element of the October cap, so things can and likely will shift, but households should not be banking on lower bills later in the year. The Government will face real pressure to spell out what support is available – and to whom – before winter. For a lot of people this is not some abstract economic question, it is a decision about how warm they can afford to keep their home.
What we do know is while some form of short-term support will be needed, without a longer-term move away from energy imports, whose prices can shift dramatically, we are going to keep having this conversation."
Introduction: UK Energy Price Cap Rises by £200
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The energy price cap in Great Britain will rise by 13% from July, the regulator Ofgem announced this morning.
This increase means households will face the steepest summer rise in energy charges in four years following months of soaring market prices.
Under the new cap, the average gas and electricity bill will increase to the equivalent of £1,862 per year (up from £1,641) from July until the end of September, reflecting the rise in global energy market prices caused by the war in the Middle East.
Ofgem, the energy regulator for Great Britain, determines the maximum a supplier can charge for each unit of gas and electricity based on the cost of supplying energy to homes, including the average wholesale market costs in the months leading up to the start of each new cap. The cap also includes the maximum daily standing charge, which is the flat daily fee levied for a connection regardless of how much or little energy is used.
"Today’s price change reflects continued volatility in global energy markets. This means higher wholesale gas prices, driven by ongoing conflict in the Middle East, is impacting the price we pay for energy.
We understand many will be concerned about rising prices. While energy use typically falls over the summer months, there are still practical steps households can take to manage costs, including exploring fixed tariffs or changing their payment method. Smart meter customers can also take advantage of half price or cheap electricity at the weekends.
While our energy supplies remain secure, the best way to limit this exposure is by investing in our energy network. That’s why we’re unlocking the funding needed for the biggest transformation of our lifetime to deliver a system that is secure, resilient, and works for consumers across Great Britain."
The Agenda
- 5am BST: European car sales data for April
- 7am BST: Ofgem price cap for 1 July to 30 September
- 5pm BST: Deadline for any legal challenge of FCA motor finance compensation to be filed
