Cornwall Insight expects the Ofgem energy price cap will rise to £1,850 this summer, an increase of 13% on the current £1,641 annual bill
Energy bills are forecast to rise by more than £200 a year for the typical household from July with an update from Ofgem due next week.
Cornwall Insight expects the Ofgem energy price cap will rise to £1,850 this summer, an increase of 13% on the current £1,641 annual bill.
The main reason behind the predicted spike is the war in Iran, which has triggered higher wholesale prices following the closure of the Strait of Hormuz, a shipping route for around 20% of global oil and gas.
Cornwall Insight warned “the bigger concern” will come in October when temperatures drop and people start to use more energy, with forecasts currently at a similar level as July.
However, price cap predictions will depend on how long the Middle East conflict continues for.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “A summer rise will be painful for households, but the bigger concern is October when household demand traditionally picks up.
“If the cap stays at a similar level as July, that is when the Government will need to think seriously about targeted support for the most vulnerable.”
Ofgem will announce its July price cap, which will remain in place for three months, on May 27. The price cap does not put a limit on how much you can pay for energy – instead, it sets the maximum unit rates and standing charges.
It represents how much a household with typical energy usage, and that pays by direct debit, can expect to pay over a year.
You will be covered by the price cap if you are on a standard variable rate tariff. Richard Neudegg, director of regulation at Uswitch.com, urged people to check if they can save money by locking into a fixed energy deal.
He said: “A rise of this magnitude will be alarming, especially with higher costs forecast for the winter too. Thankfully, households can opt out of this price rise if they act now.
“The expected 13% rise to energy bills is completely avoidable. A number of fixed tariffs currently undercut the predicted price cap, some by over £200 for the average home.”
To find a fixed energy deal, use a comparison site and enter your postcode to find the latest tariffs. Compare the quoted costs to your current price cap rate, while also taking into account any exit fees.
