Research consultancy Cornwall Insight has released its predictions for the Ofgem October – December energy price cap, forecasting a rise after two successive falls.
Ahead of Ofgem’s announcement, which is scheduled for Friday 23 August, Cornwall Insight has predicted the October price cap will rise to £1,714 per year for the average household on a dual fuel tariff, a 9% increase from the current cap of £1,568.
In the medium-term, Cornwall Insight forecasts that the price cap will see a modest rise in January 2025, adding that recent tensions in the Russia – Ukraine war could drive prices higher.
Several factors are being blamed for the rise, with rising wholesale market prices since the start of August named as the key driver behind the uptick in bills.
Analysis notes that the market has not fully recovered from the energy crisis caused by Russia’s invasion in Ukraine and as such, remains highly sensitive to global events that could disrupt supply. Additionally, the UK’s reliance on imported energy leaves the country even more vulnerable to global volatility.
Dr Craig Lowrey, principal consultant at Cornwall Insight said: “This is not the news households want to hear when moving into the colder months. Following two consecutive falls in the cap, I’m sure many hoped we were on a steady path back to pre-crisis prices. However, the lingering impact of the energy crisis has left us with a market that’s still highly volatile and quick to react to any bad news on the supply front.
“Despite this, while we don’t expect a return to the extreme prices of recent years, it’s unlikely that bills will return to what was once considered normal. Without significant intervention, this may well be the new normal.
“The government will need to adopt a two-pronged approach to tackle rising energy bills. Immediate action is needed to ease the financial burden on households – such as the introduction of social tariffs, or reform of the price cap – but that’s only part of the solution. We must also develop a long-term strategy to secure our energy future. This means a fundamental overhaul of our energy system, with a strong emphasis on increasing domestic energy production. Simply waiting for prices to drop on their own isn’t an option, we need a proactive and forward-thinking approach to ensure long lasting energy affordability and security.”
‘Alarming’ – industry reacts
These predictions have caused concern among many in the energy industry, who fear that vulnerable customers could be left in dangerous situations as a result of further energy bill rises.
National fuel poverty charity National Energy Action (NEA) was among the first to express concern, with NEA chief executive Adam Scorer commenting: “If these alarming estimates are confirmed by Ofgem on Friday, energy bills and energy debt will stretch household finances beyond breaking point.
“Households will go into winter with less support and higher prices. This can still be avoided if the UK government and Ofgem act urgently to directly reduce customer debt levels and energy prices for those most in need.”
Mike Thornton, chief executive of Energy Saving Trust argued that the government must take action to balance the energy market, stating: “Today’s forecast brings into even greater focus the urgent need for the UK government to address persistently high energy prices. People will only see the benefits of its ambitious clean power target and eagerly anticipated Warm Homes Plan if there is also rapid action to bring down overall energy demand.
“We need to see a clear roadmap to upgrade the UK’s 15 million energy-inefficient homes. The roadmap needs to outline access to low-cost finance and incentives for the supply chain to scale up to meet demand for home upgrades. In England, a national advice service offering expert, personalised support must underpin this to ensure people are empowered to improve their homes and reduce their energy bills. This must be a priority when the UK Government returns from recess next month.”
