Energy price cap to remain ‘significantly’ above £3,000 a year until at least 2024, say experts

Energy bills are set to rise to above £3,600 a year this winter experts predict.

Consultants, Cornwall Insight has said its latest forecasts for the Default Tariff Cap show a typical household energy bill will be well over £3,000 a year for the next 15 months, with the average bill over Summer 2023 (Apr-Sep) sitting at £3,649 – just over £300 per month.”

The grim forecast came as BP released its latest financial performance data which showed the energy giant had made £6.9bn in profit between April and June – more than triple the amount it made in the same period last year.

The price cap is predicted to hit £3,359 for the Q4 2022 (Oct – Dec 2022) and £3,616 for Q1 2023 (Jan – Mar 2023).

While predictions for the price cap have continued to rise amid wholesale market volatility, due to uncertainty over Russian gas supplies ahead of winter, these latest forecasts indicate the potential longevity of high household energy costs.”

“There are several ongoing industry consultations being undertaken by energy regulator Ofgem that will affect the level of the cap, and as part of our forecasts we have taken a view on how these will play out.”

“The main one of these is the proposed move from the current use of seasonal cap periods to quarterly caps with effect from this October.”

“Customers will be sadly used to these ever-increasing price cap forecasts Cornwall Insight has said.

Dr Craig Lowrey from Cornwall Insight said: “We have less than a month until the new price cap is announced and given the trends in the wholesale market and the concerns over Russian supply, unfortunately the only change to the prediction is likely to be up.”

“However, while the rise in forecasts for October and January is a pressing concern, it is not only the level – but the duration – of the rises that makes these new forecasts so devastating.”

“Furthermore, given the current level of the wholesale price, this level of household energy bills currently shows little sign of abating into 2024.”

Dr Lowrey said: “While the UK government has pledged some support for October’s energy rise, our cap forecast has increased by over £500 since the funding was proposed, and the truth is the £400 pledged will only scratch the surface of this problem.”

“Our new figures show that even increasing support for October will not make much of a dent in what is likely to be a sustained period of high energy bills. A review of delivering support for the next cap periods should be on the top of the to-do-list for any incoming Prime Minister.” He said.

As our price cap breakdowns show, tinkering with VAT and policy costs will only make a dent in bills, when it is the high wholesale prices behind the increases. Dr Lowrey added.

Justina Miltienyte, head of policy at Uswitch.com, said:“With the price cap likely to be updated every three months for the first time, the predictions of the prices set to hit just after Christmas will bring more pain to households at the time they use most energy.

“This latest figure of £3,615 for January will be deeply alarming to households already set to face steep October price rises, while the Government support package will most likely not be enough to shield customers from the worst of the impacts of these price increases.

“The Energy Bill Support needs to be urgently reviewed. The new predictions will leave a lot of people worried about how they are going to afford their bills this winter, and they desperately need to know that sufficient financial support will be provided.

“Households need clarity as soon as possible to help them plan for the most expensive winter in living memory.”