The Default Tariff Cap is now predicted to stay above £3,000 a year for the next 15 months, according to the most recent forecast from Cornwall Insight.
Continued market volatility amid concerns over the security of gas going into winter, in particular following the Russian invasion of Ukraine, have led to further jumps in price cap forecasts for Q4 4 2022 and Q1 2023.
Cornwall Insight now predicts the cap to hit £3,359 in October and then £3,616 in January.
“Customers will be sadly used to these ever-increasing price cap forecasts,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.
“We have less than a month until the new price cap is announced and given the trends in the wholesale market and the concerns over Russian supply, unfortunately the only change to the prediction is likely to be up. However, while the rise in forecasts for October and January is a pressing concern, it is not only the level – but the duration – of the rises that makes these new forecasts so devastating. Furthermore, given the current level of the wholesale price, this level of household energy bills currently shows little sign of abating into 2024.”
He continued to point to support from the government set to come into force in October. Households will receive £400 over six months to help manage the price cap increase, funded in part through a windfall tax on oil and gas companies – who have seen record high profits amid the high gas prices.
Since this support was initially announced by then-chancellor Rishi Sunak however, Cornwall Insight’s cap forecast has increased by over £500.
“The truth is the £400 pledged will only scratch the surface of this problem,” continued Dr Lowrey.
“Our new figures show that even increasing support for October will not make much of a dent in what is likely to be a sustained period of high energy bills. A review of delivering support for the next cap periods should be on the top of the to-do-list for any incoming Prime Minister. As our price cap breakdowns show, tinkering with VAT and policy costs will only make a dent in bills, when it is the high wholesale prices behind the increases.”
Trade association Energy UK for example warned last month that the crisis was now “too big for any industry to meet”, as it highlighted a number of avenues government could take to protect consumers.