Millions of households could face annual energy bills of around £3,000 in October when Ofgem announces its price cap update.
This substantial rise is according to the latest forecasts from sector specialists Energy UK, and if this turns out to be the case, it would mean our bills will be more than double what we are paying on the current price cap.
What’s more, this will also be around £1,000 more than the looming April price cap, which has already confirmed rises on standard variable tariffs from £1,277 per year to £1,971.
A ‘worrying time’ for consumers and the energy sector
The continuing energy crisis, soaring wholesale prices and the conflict in Ukraine have been the key drivers for these predictions, but such steep rises could be catastrophic for UK households, seeing millions pushed into fuel poverty.
Speaking on BBC Radio 4’s Today programme, Energy UK’s chief executive Emma Pinchbeck offered these comments on the situation:
"It’s a really worrying time for both customers and industry, and we’ve been saying since the autumn that we expect bills to go up again in October.
"I think, with what we’re seeing in Ukraine and in the oil and gas markets, we’re now expecting those to go up further.
"We’ve seen public figures quoting bills at around £3,000 in October. We know they’ll be around £2,000 from April when the price cap goes up.
"If this turns out to be an enduring situation in the market, you can expect bills to be anywhere between £2,500 and £3,000 in October, depending on the tariffs that people have, and what happens in the market."
Ms Pinchbeck added: "The important thing to anyone listening to this on their bills is that there is help available, particularly for vulnerable customers, and we are going to be working with Government to try to get extra support in place."
Ofgem warns against early price cap predictions
Ms Pinchbeck also warned of continuing market volatility and more suppliers going bust alongside the price rises. However, Ofgem has emphasised that such predictions shouldn’t be taken as gospel as the situation is likely to change by the autumn.
Despite this, there have been similar forecasts from other industry experts. Cornwall Insight recently tweeted that the attack on Ukraine has added another £400 to their estimates for the October price cap, bringing their forecasts to £2,900.
Dr. Craig Lowrey, a senior consultant at CI, subsequently commented on how the government may need to offer further help to UK homes:
"The UK Government will need to be ready with ways to mitigate the impact on consumers, with an increase in financial support to households likely to be a necessity, in addition to renewed considerations on support to business customers."
Is now the time to switch to a fixed energy tariff?
The advice for consumers right now is to still avoid running an energy comparison as it’s still the case that not even the best energy deals available from the UK’s best energy suppliers can beat the current price cap.
However, following Cornwall Insight’s update, Martin Lewis from MoneySavingExpert recently posted a blog explaining that if the October price cap forecasts are accurate, there might be better value in some fixed deals in the long term. He said:
"So the big question, of course bearing all that in mind, is at what rate is it worth getting a cheap fix? The rule of thumb is this: I would not switch to a fixed deal unless it was less than 75% more than the current price cap, or if you want to base it on the April price cap, no more than 15% more than the April price cap.
"So if you can find a fix within that price range then it is worth getting. But you will not find those prices on a comparison site. There are no open market options close to that price – they're all 40% more than the April price cap at the very cheapest."
This is all of course subject to change, and as Ofgem has warned, there’s no guarantees these predicted increases will reflect what actually happens in the coming months.
What to do if you’re struggling with your energy bills
For those of you looking for immediate help with your energy bills, you should contact your supplier to see if they can help you. There’s also a number of new government schemes now available that have been designed to help UK households who are struggling.
