UK household energy bills are set to stay above £3,000 a year until at least 2024 due to anticipated increases to the government’s energy price cap, according to an analysis by Cornwall Insight.
“While our predictions for the price cap have continued to rise amid wholesale market volatility, due to uncertainty over Russian gas supplies ahead of winter, these latest forecasts indicate the potential longevity of high household energy costs,” Cornwall Insights said in a statement.
“We have less than a month until the new price cap is announced and given the trends in the wholesale market and the concerns over Russian supply, unfortunately the only change to the prediction is likely to be up.”
In August 2020, Ofgem announced a default tariff cap designed to protect prepayment meter customers after the prepayment meter price cap expired.
The energy price cap is designed to limit price increases on consumer energy bills, with the current price cap period that began in April due to last through to 30 September.
Research firm Cornwall Insight’s latest forecasts suggest that under the default cap the average household bill will rise to £3,649, or more than £300 per month, next summer.
From October, it predicts the price cap will be lifted to £3,359 for gas and electricity combined, rising to £3,616 in the first quarter of next year (from January to March).
Ofgem is currently carrying out industry consultations and will likely shift from seasonal limits to quarterly caps from October.
Cornwall Insights predicts that Ofgem will impose a £1,518.12 cap on electricity and a £1,840.72 cap on gas from October.
Combined, energy bills would be allowed to rise to £3,358.84 under those limits, with energy suppliers such as British Gas owner Centrica PLC (LSE:CNA) (Centrica PLC (LSE:CNA)) and SSE PLC (LSE:SSE) (SSE PLC (LSE:SSE)) likely to raise prices if the limits are increased.
The combined energy price cap is expected to continue rising to £3,729.31 in the second quarter of 2023 and is expected to stay above £3000 for all of 2023, Cornwall Insights predicts.