Energy bills will rise 80% to £3,549 in October, Ofgem confirms
The enormous rise follows soaring wholesale energy prices, driven up by Russia deliberately restricting oil and gas supplies to Europe and the UK over the past six months following its invasion of Ukraine.
Last week saw a 15% increase in wholesale prices with energy analysts Cornwall Insight warning the “highly volatile nature of the market” means forecasts for the next hike to be announced in January would be subject to “significant change – both up and down – over the next few months”.
The current price cap sits at just over £1,971 for the average household’s annual energy bills following a 54% rise in April – a record. The cap was £1,277 just last winter.
Cornwall Insight’s updated forecasts now expect energy bills to hit £4,650 in January and £5,341 by April next year.
A separate forecast from research house Auxilione estimates even higher average bills, with its analysts predicting the price cap to hit £6,089 in April 2023.
Rising energy bills were ‘inevitable’
Dr Craig Lowrey, senior consultant at Cornwall Insight, said: “The rise in the price cap was unfortunately inevitable, as UK bills continue to be the victim of an unstable and unpredictable global market. While there is still a long time until the January and April caps are set, the energy crisis is showing no sign of abating.
“With every unprecedented rise in bills comes the need for greater reflection on the cap’s purpose and continued place in the energy market. Throughout the energy crisis, the government and Ofgem have remained committed to the cap and in its ability to shield consumers from a volatile energy market.
“However, the cap was never meant to be a permanent solution, and was created for a different energy market from the one we face today and has not protected consumers from what will be incredible hardship this winter. We urge, as we have done previously, for the cap to be reviewed and mechanisms for protecting the most vulnerable, such as social tariffs, to be considered as viable alternatives.”
Monthly bills will hit £500
Analysis from the Resolution Foundation suggests the higher price cap means energy bills are set to treble this winter to around £500 a month.
Torsten Bell, chief executive of the Resolution Foundation, said: “Britain is on course for a winter catastrophe unless significant help is provided.
“Winter energy bills are set to average around £500 a month, while pre-payment customers will need to find over £700, more than half their disposable income, to keep the heating on in January alone. These costs pose a serious threat to families’ physical and financial health.”
He added: “The benefits system has a crucial role to play this winter, but the scale of the crisis means that combining this with more radical approaches now looks all but inevitable. Big bill reductions combined with solidarity taxes, or throwing the kitchen sink at a brand-new social tariff scheme, should be the focus for whoever becomes the next Prime Minister.”
Lowrey said several avenues should be explored to protect households, including a review and expansion of the current support package of at least £400 per household.
“However, all of these are temporary solutions and must be accompanied by a focus on implementing a viable long-term solution,” he said.
“Today should be seen as a wake-up call to policymakers that short-term thinking and triage of the energy system is not enough. Without real change to the energy system in this country it is consumers, suppliers and the economy that will all continue to suffer the consequences.”
Does the price cap affect you?
The energy price cap is a backstop protection from the government, calculated by Ofgem.
It applies if you’re on a default energy tariff, whether you pay by direct debit, standard credit or a pre-payment meter.
If your supplier has stopped trading and you are switched to a new supplier you are likely on a price-capped tariff.
It won’t apply if you are on a fixed term tariff or have chosen a standard variable green energy tariff Ofgem has exempted from the cap.
Contact your supplier to check if you are on their default tariff.
Save energy and money
Rhiannon Philps, personal finance expert at comparison site NerdWallet, said it’s important to know how to save energy and cut your costs.
Appliances: By turning off electrical items and not charging items longer than needed, you could save money. You will also want to consider washing full loads in washing machines and dishwashers to limit usage – running on lower temperatures also helps.
Kitchen: Microwaves and slow cookers tend to use less energy than ovens and offer convenience. Batch cooking can minimise oven and hob use, helping you save money. Covering pans with lids and only boiling the kettle for what you need can also conserve energy.
Heating: You can save money by only heating the rooms you use, as well as by bleeding radiators and keeping them clear from obstructions. Draught-proofing windows and doors, as well as using curtains to keep the heat in can also make a difference.
Lighting: Try and let as much natural light into your home as possible and make sure any lights that aren’t being used are turned off. Switching to efficient LED lighting can also save you money in the long run.