Energy price cap: Household bill spike could be lower than originally feared
The household energy price cap is expected to rise by a lower amount than originally feared despite price volatility caused by the Iran war, according to the latest forecasts.
The cap is expected to be £196 lower according to Cornwall Insight, who confirmed its prediction for Ofgem’s cap now stands at £1,837 for a typical dual fuel household, an increase of 12 per cent on April’s cap.
In early March, the energy consultant warned that annual household energy bills could surge by £332 to £1,973 from July when the next cap takes effect, as wholesale energy costs soared amid the Middle Eastern conflict.
The lower forecast signals an easing of energy costs, after painful spikes over the course of the six week conflict.
Gas and electric rise
Wholesale markets do remain volatile and Brits are set to still face steep rises in gas and electricity bills, after a number of plants were damaged across the Gulf by air strikes and the Strait of Hormuz was closed by Iran, choking the global oil supply.
But Iran confirmed on Friday that it had given up its stronghold on the waterway and that it is “completely open for traffic”, ending the standoff between Iran and the US and sending Brent oil plunging 9.6 per cent to $89.70 (£66).
Cornwall Insight cautioned that a rise in the cap in July is “effectively unavoidable” with rocketing wholesale prices already locked in for the months ahead with little chance they will fall to pre-war levels in the coming weeks.
But Iran confirmed on Friday that it had given up its stronghold on the waterway and that it is “completely open for traffic”, ending the standoff between Iran and the US and sending Brent oil plunging 9.6 per cent to $89.70 (£66), making the likelihood of a fall more of a reality.
Next Ofgem cap
The regulator will announce the next price cap level by 27 May.
It reduced the annual cap by seven per cent to £1,641 between April and June, driven by the government’s promise to slash bills by an average of £150 through removing green subsidies.
The government has acknowledged the likely jump and has been looking into targeted support for both businesses and vulnerable households in order to deal with the rise.
Chancellor Rachel Reeves said previously support would be given based on household income, targeting “those who need it most”, unlike the Conservative’s blanket rollout in 2022 after Russia’s invasion of Ukraine.
Businesses will also receive help with Reeves confirming the long awaited British Industrial Competitiveness Scheme would be expanded to cover 10,000 companies, up from the 7,000 previously announced.
The scheme, which the government says will cut companies’ bills by up to 25 per cent, will not come into operation until next year, although in a significant concession Reeves said support would then be backdated to this month.