Annual energy bills are forecast to top £4,200 from January, triggering a warning that Britons face “serious hardship on a massive scale” without government intervention.
The consultancy Cornwall Insight said on Tuesday that it expected the energy price cap to reach £4,266 a year for the first three months of next year.
The consultancy forecasts that bills could then rise to £4,426 in April before easing. Only a week ago Cornwall Insight predicted the energy price cap was on track to rise to £3,615 a year from January.
The consumer champion Martin Lewis said the latest forecast was “tragic news” and urged the “zombie government” to come up with an immediate action plan to help households.
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
The former chancellor Rishi Sunak announced a £15bn support package for consumers in May, including £400 for every household. However, rising wholesale prices have since threatened to wipe out the impact of that support and Sunak and his Tory leadership rival, Liz Truss, are under pressure to announce further measures.
Peter Matejic, chief analyst at the Joseph Rowntree Foundation, a charity that aims to tackle poverty, said: “Every day action is delayed is increasing anxiety for low-income families who do not know how they will get by this winter.
“The payments promised by the government earlier in the year offer some help but their scale has been overtaken by events, and they must now be at least doubled if they are to protect people from serious hardship on a massive scale.”
Cornwall Insight said rising wholesale prices and a revision of the methodology used by the regulator Ofgem to calculate the price cap were behind the increase in its forecasts.
The consultancy’s principal consultant, Dr Craig Lowrey, said: “It is essential that the government use our predictions to spur on a review of the support package being offered to consumers.”
The consultancy now expects the cap to hit £3,582 from October, an increase of £200 on its last forecast. It expects bills to begin easing next summer, to £3,810 in the third quarter and then £3,781 in the final three months of next year.
The cap, which is set quarterly by the energy industry regulator, Ofgem, was at £1,400 a year as recently as October last year.
Lowrey said: “If the £400 was not enough to make a dent in the impact of our previous forecast, it most certainly is not enough now.
“The government must make introducing more support over the first two quarters of 2023 a number one priority. In the longer term, a social tariff or other support mechanism to target support at the most vulnerable in society are options that we at Cornwall Insight have proposed previously. Right now, the current price cap is not working for consumers, suppliers, or the economy.”
Chart showing default tariff price cap over time
Ofgem last week confirmed plans to update the price cap every three months, instead of every six months, in an effort to allow suppliers to better manage the risk from volatile wholesale prices and prevent higher prices for consumers as a result of suppliers going bust.
The regulator is attempting to prevent a repeat of events last year, when almost 30 suppliers collapsed, in part due to a rise in wholesale energy prices.
Lowrey said changes to the cap had led to an increase in its predictions. However, he said the move would protect suppliers struggling with costs and prevent the cost of their collapses being added to consumers’ bills.
Ofgem plans to confirm the level of the next price cap on 26 August, days before the next prime minister will be announced on 5 September. The cap will come into force from 1 October.
Martin Lewis, the founder of the MoneySavingExpert website, wrote on Twitter: “Action and planning is needed now. The zombie govt needs to wake up sooner than 5 Sept. The leadership debate must not ignore this portentous national cataclysm any more.”
Lewis added: “People’s livelihoods, mental wellbeing and in some cases very lives depend on this. This is desperate.”
Tragic news
The latest @CornwallInsight prediction, based on Ofgem's new methodology, is an 81% price cap rise in Oct (taking typical bill to £3,582/yr) and a further 19% in Jan (so £4,266/yr)
Action & planning is needed now. The zombie govt needs wake up sooner than 5 Sept…
— Martin Lewis (@MartinSLewis) August 9, 2022
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “A tsunami of fuel poverty will hit the country this winter and these latest estimates further demonstrate that the level of support already promised by the government is just a drop in the ocean.”
Jane Tully, a director at the Money Advice Trust, said: “Government support announced so far to help with energy and cost of living price rises has been welcome but does not get close to matching the scale of the challenge households now face.”
A report by the comparison site Uswitch on Wednesday said households owed £1.3bn to their energy suppliers. The overall debt bill was already three times higher than it had been a year ago and was expected to grow this winter, the report said.
Six million households across the UK now owe an average of £206 to their energy provider, up from £188 in April. The number of homes in credit to their supplier has dropped from 11m to 9m since April.
Leave a Reply
You must be logged in to post a comment.