The boss of energy regulator Ofgem has said that households across the UK are heading for an “almost inevitable” rise in energy bills this autumn.
Although the UK government has previously said that Ofgem’s energy price cap would ‘insulate’ customers from gas price rises, Ofgem’s chief executive now believes that the spike in wholesale gas prices will be passed on to customers when the price cap is next reviewed later this year.
In a speech at the Future of Utilities event, Jonathan Brearley said that the gas price volatility caused by Russia’s invasion of Ukraine would lead to higher costs being passed on to consumers. While discussing the future of the industry in the near term, Mr Brearley said that: "while it is too early to predict what the price cap will be in October, a price increase is almost inevitable."
What is the price cap and why is it changing again?
The energy price cap is the maximum amount that an energy supplier in England, Wales and Scotland can charge a customer for a unit of energy. The price cap changes every six months and it’s governed by multiple factors, such as wholesale prices.
On April 1, the energy price cap is set to rise by almost £700 for millions of households up and down the country. However, it’s due to be reset again in October. Although many had hoped that the price cap would decrease and the cost of living crisis would ease, it now looks like the reverse will be the case and the energy price cap will rise again, based on Mr Brearley’s comments.
Due to this, some industry experts now believe that when the new price cap is unveiled, average bills could reach £3,000 a year.
Although the price cap is currently rising and is expected to rise further again later this year, it’s still advised that you stick with the price cap rather than running an energy comparison and switching supplier. This is because, due to uncertainties in the market, even the best energy deals from the country’s best energy suppliers cannot beat the current price cap. At present, many customers are being quoted up to £3,500 per year for a fixed rate.
What can be done to ease pressures?
Within his speech, Mr Brearley said it was Ofgem's priority to manage and mitigate the “inevitable consequences” of rising energy prices on British consumers. However, he also added that “as an industry, we cannot pretend that our actions can mitigate the full impact of future price rises”.
Over the coming days, Prime Minister Boris Johnson will set out an ‘energy supply strategy’ amid concern over western reliance on Russian gas and oil.
He said the government was looking at using more UK energy resources: “One of the things we're looking at is the possibility of using more of our own hydrocarbons.” However, he also added “That doesn't mean that we are in any way abandoning our commitment to reducing carbon dioxide [emissions].”
On top of this, the government has also recently unveiled a raft of measures that aim to help those struggling with their energy bills. These include a £150 council tax rebate and a £200 loan, which is repayable over five years.
If you’re currently struggling to pay your energy bills, then you should contact your energy supplier and ask them what help is available. These suppliers are also being urged to ‘reach out’ to their most vulnerable customers.
