Energy price cap could rocket to £3,363 by January, analysts warn, hammering households with a £1,400 jump in their annual bills
- Energy price cap is currently set at £1,971 per year
- Cornwall Insight expect this to rise to £3,244 a year in October
- Analysts now think the price cap could hit £3,363 in January
Households face a brutally expensive winter as energy bills could rise to more than £3,360 a year in January, analysts warned in a fresh forecast.
The energy price cap, which sets the maximum amount that an average household customers on a ‘default’ tariff can be charged, is currently set at £1,971 per year.
But analysts at Cornwall Insight now expect it to rocket sending energy bills to £3,363 in January, after climbing to £3,244 a year in October.
Their predictions have been revised up by hundreds of pounds in a matter of weeks, as the energy price spike continues rather than easing as hoped.
Going up: The energy price cap could rise to £3,244 a year in October and to £3,363 in January
Last month, Cornwall Insights had calculated the cap would rise to £2,980 in October and £3,003 for the first three months of 2023, but said continued political and economic uncertainty will likely keep pushing wholesale prices higher.
Ongoing uncertainty regarding Russian gas flows into continental Europe, as well as more recent concerns such as the halted strike by Norwegian gas workers, have been driving wholesale energy prices higher – ‘which ultimately trickles down to consumers,’ the analysts said.
Energy regulator Ofgem will announce the October price cap next month, and Cornwall said it was ‘unlikely to see any significant decrease’ to their predictions for this autumn.
It follows the introduction of quarterly energy price cap changes, which the watchdog claims will help households benefit more quickly when prices begin to fall from their current highs.
The latest expected surge comes as official figures released today show four in ten people are already struggling to afford energy bills.
Dr Craig Lowrey, principal consultant at Cornwall Insight said: ‘As the energy market continues to grapple with global political and economic uncertainty, the corresponding high wholesale prices, and the UK’s continued reliance on energy imports has once again seen predictions for the domestic consumer default tariff cap rise to what are even more unaffordable levels.
‘There is always some hope that the market will stabilise and retreat in time for the setting of the January cap.
‘However, with the announcement of the October cap only a month away, the high wholesale prices are already being ‘baked in’ to the figure, with little hope of relief from the predicted high energy bills.
‘Ofgem are continually reviewing the cap and there are a raft of consultations and potential reforms which could impact these forecasts.
‘However, as it stands, energy consumers are facing the prospect of a very expensive winter.’
The price cap is already worse for customers than it has ever been. For an average household, the price of energy increased from £1,277 to £1,971 in April.
Previously, the price had been as low as £1,042 in the summer of 2020 – the cheapest since the policy first came into force in 2019.
The looming rise in energy bills is another blow to households, whose finances are already stretched thanks to rising food and fuel prices.
Consumer price inflation hit 9.1 per cent in May, the highest in 40 years, and is expected to hit 11 per cent in the coming months.
> How to save money on energy: Your essential guide to bills