Gas and electricity bills for UK households are set to surge to a record £1,995-per-year from next April, which represents a 56% rise in energy bill prices, investment bank Investec has predicted.
The current energy price cap, which was set at £1,277 per year for households in October, is expected to rise substantially the next time Ofgem, the energy regulator, alters the limit.
“With wholesale commodity prices remaining elevated, we suggest that the tariff cap could jump by 56% reaching £2,000 [a year] for the summer 2022 period,” said Investec analyst Martin Young.
An extra £700 could have to be forked out by homes unless the Government or regulator intervenes with “mitigating actions.”
The soaring wholesale gas prices throughout 2021 has seen gas prices rocket some 500% due to raised and excess energy demand, while energy exports from Russia and France have fallen drastically, while the weather has meant renewable generation has also been unreliable.
Wholesale gas prices are trading at a record 364p per therm – some six times larger than its level at the beginning of the year, The Financial Times noted.
Britain’s energy price cap protects over 15mln households who choose not to shop around for fixed prices.
Ofgem announces price cap changes twice annually – in April and October based on the lagging whole price with the next change scheduled for February.
Young believes the higher wholesale energy costs would account for £560 of the rise, while £72 would reflect the cost of supplier failures.
The government has been under intense pressure to alleviate some of the likely increase, especially for poorer households but so far has resisted though regulator Ofgem has proposed some reforms short of scrapping the cap that might include three monthly changes.
Energy UK, a trade body, has suggested a government loan may contribute to reducing April’s rise, as it will spread the costs of rescuing customers from collapsed suppliers.
Since 26 August, 26 energy suppliers have gone bust in the UK, which has impacted approximately 4mln households and marks the worst crisis in the sector for 20 years.