UK households warned of further 30% rise in energy bills next year
Analysts forecast main energy price cap likely to hit £1,660 next April amid surge in wholesale gas prices
Household energy bills in Britain are forecast to rise by at least 30 per cent early next year as wholesale gas prices continue to surge, analysts have warned.
The main energy price cap is expected to climb to £1,660 a year from next April for a household with average consumption that buys both electricity and gas, according to energy consultancy Cornwall Insight. This would be the highest level since records that track domestic energy bills began in 2009.
Cornwall’s prediction will add to concerns over a cost-of-living crisis this winter, with the poorest families likely to be hit hardest. Charities have already warned that some households will be forced into desperate measures such as rationing their heating.
Other analysts have previously calculated that the main price cap could jump by more than 40 per cent when it is next reviewed by Ofgem, the industry regulator, in early 2022.
UK and European wholesale gas prices jumped higher again on Wednesday morning to trade close to 10 times their level at the start of the year over supply concerns as the northern hemisphere heads into the cold weather of winter.
Prices changed course later in the day, however, following suggestions by Russian president Vladimir Putin that his country, one of the biggest gas producers in the world, could increase supplies to western Europe.
Last year the UK consumed around 74bn cubic metres of gas, half of which was imported from countries including Russia, Norway and Egypt, according to OGUK, which represents the UK oil and gas industry.
Britain’s main energy price cap applies to around 11m households and is reviewed by Ofgem every six months. The regulator increased the level of the cap by 12 per cent from the start of October to £1,277.
Prices for a further 4m households that use prepayment meters to buy their energy are governed by a second, more expensive cap that rose by 13 per cent at the start of the month to £1,309.
Households whose fixed-price energy deals have recently come to an end have already faced a sharp jump in their bills running into hundreds of pounds.
Some companies have started marketing new fixed-price deals above £2,000 a year, although customers are advised not to switch.
Cornwall cautioned that consumers could be hit with even higher bills as they will also have to cover the cost of rescuing the 1.7m customers of the 10 energy suppliers that have gone bust since the start of August due to the spike in wholesale gas prices.
Suppliers that rescue the customers of failed businesses are able to pass on their costs via an industry levy that filters through to consumer bills after about 12 months.
Craig Lowrey, senior consultant at Cornwall Insight, said he had not factored in this cost in his latest price cap predictions but he warned the energy market remained “on edge for fresh volatility and further consolidation” among suppliers.