Energy bills are expected to increase by over £200 per year for the average household starting in July, as forecasted by Cornwall Insight ahead of an upcoming update by Ofgem. The energy price cap is projected to climb to £1,850 this summer, marking a 13% surge from the current annual bill of £1,641. This spike is primarily attributed to the conflict in Iran, which has led to heightened wholesale prices following the closure of the vital Strait of Hormuz, responsible for a significant portion of global oil and gas transportation.
Cornwall Insight cautioned that the real concern will arise in October when temperatures drop and energy consumption typically rises, with projections indicating similar levels to those in July. The duration of the Middle East conflict will determine the accuracy of the price cap predictions.
Dr. Craig Lowrey, a principal consultant at Cornwall Insight, emphasized the potential impact on households, particularly in October when energy demand traditionally peaks, urging the government to consider targeted assistance for the most vulnerable. Ofgem is set to announce the July price cap, effective for three months, on May 27, which sets the maximum unit rates and standing charges without capping the total energy costs. The cap reflects the expected annual expenditure for a household with average energy usage paying via direct debit.
Consumers on standard variable rate tariffs are covered by the price cap, with Richard Neudegg, director of regulation at Uswitch.com, advising them to explore fixed energy deals to potentially save money amidst the anticipated price hike. Neudegg highlighted the avoidability of the projected 13% increase in energy bills, mentioning that various fixed tariffs are currently priced below the expected cap, offering potential savings of over £200 for the average residence. To secure a fixed energy deal, consumers are encouraged to utilize comparison sites, input their postcode to access the latest tariffs, and compare costs while considering any associated exit fees.
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