Experts anticipate that Ofgem’s price cap will surpass previous estimates when it adjusts in July, signaling potential increases in household energy bills, as per analysis by energy consultants Cornwall Insight.
According to Cornwall Insight, the typical household’s energy bill is projected to reach approximately £1,560 per year starting in July, with further escalation to £1,631 from October. This marks a notable 7% increase compared to the consultancy’s previous forecast issued around a month ago.
Ofgem adjusts the price cap every three months, considering various factors, with wholesale energy prices being a key determinant. Although wholesale prices recently hit their lowest point in a quarter-century, a slight uptick has been observed in recent weeks.
Despite the anticipated increases, both projections would still fall below the forthcoming price cap set to take effect on Monday, currently fixed at £1,690 per year, which is already lower than existing bills.
It’s important to note that the price cap doesn’t impose a ceiling on total household bills; rather, consumers pay for each unit of gas and electricity consumed, with the provided figures representing averages for households with typical usage.
Looking ahead, Cornwall’s forecast indicates a modest increase of around £3 in January next year when the price cap undergoes another adjustment.
Dr. Craig Lowrey, Principal Consultant at Cornwall Insight, commented on the market dynamics, stating, “With wholesale prices hitting a two-and-a-half-year low, it was only a matter of time before a slight rise occurred as the market stabilizes.” He also noted the impact of Ofgem’s changes, particularly adjustments benefiting direct debit payments to level the playing field for prepayment customers.
“While no household will welcome forecasted increases, it’s essential to recognize that these projections still represent a decline from the new cap taking effect in April, which itself reflects a significant decrease,” Dr. Lowrey added, emphasizing reasons for cautious optimism regarding future energy bills.