The government’s cap on energy prices is poised to jump by 16% to the equivalent of £1,999 for the average annual dual-fuel bill in a further blow to struggling households, according to figures from the leading forecaster Cornwall Insight, The Guardian reported.
The increase for the January to March period is well above the consultancy’s previous prediction of a 9% rise, with analysts blaming the uptick on the recent rise in gas market prices to three-year highs.
It would be the biggest quarterly jump since January 2023, when the energy crisis that followed the full-scale invasion of Ukraine the year before was at its height.
Craig Lowrey, the principal consultant at Cornwall Insight, said, “These prices are going to hit households hard. January is already a difficult month for many, with cold weather and bank balances still recovering from Christmas, and now they face the biggest price cap rise we’ve seen in four years.”
Gas prices in Europe have doubled in recent months as the continent prepares to enter the cooler months with gas stores at their lowest level in 13 years after the US-Israeli war against Iran triggered an increase in global market prices.
Buyers have delayed refilling storage facilities after a cold end to last winter, and extra gas power generation during the summer heatwaves, depleted stocks while oil and gas exports from the Persian Gulf remain severely disrupted by threats to tankers passing through the Hormuz and Bab Al-Mandab straits.
Cornwall Insight’s forecast takes into account Prime Minister Andy Burnham’s removal of VAT from energy bills for six months from October 1, which takes about £45 off the typical annual bill.
The energy regulator for Great Britain, Ofgem, will set the January price cap based on wholesale prices between August 19 and November 17, so the outlook could still change if prices drop, but Cornwall Insight said an increase was “all but certain” given the rises so far this month.