Cornwall Insight has released its final predictions for the April energy bill price cap, indicating that the price cap will rise by around £85 for the average customer.
The research firm has forecast that the April price cap will rise to £1,823 per year for the average dual fuel customer paying by direct debit, up 5% from the current price cap of £1,738. For electricity, the cost per unit is predicted to rise to 26.57p/kWh, with standing charges capped at 53p per day, while for gas, the standing charge is expected to be capped at 29p per day, with unit cost caps rising to 7p/kWh. If this comes to pass, this will be the third consecutive price cap rise, and Cornwall Insight notes the situation is unlikely to get better as the year goes on.
Analysts note that while the price cap increase has been expected for a significant period of time due to volatility in international markets, the cap forecast has risen in recent weeks due to cold weather and low renewable energy production across Europe causing wholesale gas prices to skyrocket.
While the announcement of talks between Russian and American officials aimed at ending the invasion of Ukraine has seen gas prices fall, this has come too late to impact the April cap. The effects of this price fall are expected to trigger a decline in prices from July 2025 onwards before the cap is predicted to rise again in October.
Ofgem will announce the official April cap on 25 February.
Fuel poverty on the rise
The news is likely to cause significant worry among UK energy consumers as fuel poverty due to high energy prices continues to strike.
September 2024 statistics from the UK’s energy regulator Ofgem noted that between Q1 and Q2 2024, energy debt and arrears rose by 12%, from £3.31 billion to £3.7 billion, with the total sum of debt increasing by almost half between Q2 2023 and Q2 2024. Meanwhile, an August 2024 report from the Committee on Fuel Poverty revealed that attempts to reduce fuel poverty had almost entirely failed, with rates of fuel poverty falling by just 0.1% between 2022 and 2023.
In response, National Grid announced earlier this week that it will launch a funding programme to support British and American households struggling with energy costs, donating £13.8 million to UK and US charities that support households in energy crisis over the next three years.
Experts weigh in
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “While we’re not seeing a return to the peak of the energy crisis, the market is more volatile than it has been in quite some time, and households are bearing the brunt of cold weather and low gas storage levels across Europe.
“It might be tempting to look at rising bills and conclude that the push towards renewables is not working, and we should scale back on the transition. But the reality is higher energy costs only reinforce the need to accelerate our expansion of clean, reliable energy across the UK. While building out renewables requires market reform, as well as investment and time, the alternative is to be left forever at the whim of the volatile international wholesale market, which as recent years have shown, can be a pretty expensive place to be.”
Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit (ECIU), said: “British households are still paying the price for our reliance on expensive and volatile gas. In early February, the UK saw the highest wholesale gas prices we’ve seen for two years as a result of rises on the international markets, and where wholesale gas prices go, household bills follow, as the UK has no control of the price of gas and we are very reliant on it for home heating and power generation.
“Lowering gas demand is the best way to avoid another, similar gas crisis in the UK whereas more gas from the North Sea or fracking will not deliver energy security as the UK will never have control of internationally set prices.”
Stew Horne, head of policy at Energy Saving Trust, said: “For the past three years, people in Great Britain have endured high energy prices, and this is set to continue. The UK Government’s ambitions to scale up UK-generated clean energy is one part of the picture to permanently bring down energy bills and reach net zero. Reducing energy demand is equally important.
“Ahead of the Warm Homes Plan due this summer, we’re urging policymakers to put in place clear, actionable steps to help people upgrade their homes to make them warmer and more affordable to heat. In practice, this means enabling long-term access to low-cost green finance for all households.”
