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Energy bills to sit above £3,000 a year ‘until at least 2024’

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Typical household energy bills will be well over £3,000 a year until at least 2024, with the level and duration of rises ‘devastating’, according to a leading consultancy.

Revised forecasts on the energy price cap – a limit on the unit rate and standing charge for default tariffs – revealed the average bill for Q4 2022 will rise to £3,359 – up from £3,244.

According to Cornwall Insight, the energy price cap for Q1 2023 will rise from £3,363 to £3,616.

Meanwhile, it also predicted that the average bill over summer 2023 will sit at £3,649 – that’s more than £300 a month.

The energy consultancy said its predictions have continued to rise amid wholesale volatility, due to uncertainty over Russian gas supplies ahead of winter, with these latest forecasts indicating “the potential longevity of high household energy costs”.

This comes as the energy regulator – Ofgem – is set to announce the price cap later this month for bills from October. At the same time, the energy price cap will be updated quarterly, rather than twice a year.

The table below shows Cornwall Insight’s default tariff cap forecasts for bills each year, including VAT:

And the graph below revealed the default tariff price cap levels since 2018, as well as Cornwall Insight’s predictions for the next four quarterly cap periods:

‘Level and duration of rises makes forecasts so devastating’

Dr Craig Lowrey, principal consultant at Cornwall Insight said: “Customers will be sadly used to these ever-increasing price cap forecasts. 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.

“While the 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.”

Prime ministerial candidate Rishi Sunak last week announced he would scrap the 5% VAT rate on household energy bills if prices continue to rise later this year, claiming to save households £160, if he is chosen to lead the Conservative party.

Lowrey added: “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. 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.”

‘Most expensive winter in living memory’

Justina Miltienyte, head of policy at price comparison site, Uswitch, 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 £3,616 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.”

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