The energy price cap is set to rise by 13% in July
Millions of households fearing another crippling jump in energy bills this winter have been handed a glimmer of hope after experts scaled back forecasts for the next Ofgem price cap rise.
Industry analysts at Cornwall Insight now expect the energy price cap to increase by no more than 2% in October, taking the annual bill for a typical household from £1,862 to around £1,899. While any increase will be unwelcome for families already grappling with high living costs, the latest forecast suggests the feared winter surge may be far less severe than many had feared following turmoil in global energy markets.
The projected October cap would leave bills around 8% higher than the equivalent winter period in 2025, but is considerably lower than some worst-case scenarios that had been feared after conflict in the Middle East sent wholesale gas prices soaring.
Energy markets have been rattled for months by fears over supplies from the Gulf region, with the closure of the Strait of Hormuz and damage to energy infrastructure pushing up wholesale prices earlier this year. However, recent signs of progress towards a diplomatic settlement in the region have helped calm markets, raising hopes that the October increase could end up being even smaller than currently forecast.
Cornwall Insight said wholesale prices have fallen back from the peaks seen in March, although they remain significantly above levels seen before the conflict erupted. The consultancy warned that there is still considerable uncertainty because Ofgem has only recently begun the three-month assessment period used to calculate the October-to-December price cap.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said households should not assume bills will quickly return to pre-conflict levels even if peace is secured.
He said: “A lot of people assume that if the conflict in the Middle East ended tomorrow, prices would return to their pre-conflict levels fairly quickly. However, that may be overly optimistic.”
He added: “The damage to infrastructure, the disruption to supply chains and the erosion of market confidence will not unwind overnight, and the impacts could be felt in bills for longer than many expect.”
The latest forecast comes after Ofgem confirmed that the July price cap will rise by £221, or 13%, to £1,862 a year for a typical dual-fuel household paying by direct debit. That increase will hit consumers from next month, meaning households face higher bills throughout the summer before any further rise this autumn.
Consumer groups are expected to renew calls for ministers to clarify what support will be available this winter if energy costs remain elevated.
The Government has already indicated that any help would be targeted rather than the universal support packages seen during the energy crisis triggered by Russia’s invasion of Ukraine. However, details of who would qualify and how assistance would be delivered have yet to be announced.
