Energy price cap expected to soar by more than £100 later this year, experts warn

The energy price cap is likely to increase by more than £100 at the next review, experts predict.

The new level will be around £1,250 per year for the winter 2021 cap, according to data from energy analysts, Cornwall Insight.

This would mean an increase of 9.8 per cent for a typical dual fuel direct debit customer.

The rise is thanks to a ‘considerable’ rise in wholesale costs with experts saying it is at the highest levels since the Beast from the East in 2018.

The energy price cap is thought to increase by more than £100 at the next review, experts say

Ofgem, the industry regulator, launched the energy price cap in January 2019 as a way of keeping down the cost for households.

However, many suppliers price to the limit and have been accused of treating the cap as a target.

Despite initially being billed as a temporary measure, it has been in place for over two years with the limit reviewed every six months with the next one due in October of this year.

Now it is thought the price will soar thanks to a hike in wholesale costs.

Dr. Craig Lowrey, senior consultant at Cornwall Insight, said: ‘Wholesale prices have been hit by a combination of factors. 

‘Underlying commodity prices have risen, so, too, have carbon prices reaching a high of €50 per tonne of carbon and more than doubling over the past year.

‘On top of this, underlying gas prices have risen considerably due to a cold winter across Europe and low levels of gas in storage facilities. 

‘Moreover, the rising carbon, oil and LNG prices have further supported this rise in underlying gas prices.

‘More generally, we are experiencing tighter power supply margins than last winter due to unforeseen and prolonged outages of several ageing fossil fuel and nuclear plants.’

Customers are encouraged to use price comparison sites to see if they can save money on their energy bills by switching to a, usually cheaper, fixed tariff or another provider.

However, the experts believe prices will rise across the board later this year.  

Lowrey added: ‘Competitive tariffs are priced around £250 below the level of the cap. 

‘With a substantial increase in the wholesale price, it is extremely likely to expect this to be passed through fairly quickly in terms of prices to new customers.’

‘Although there are still several uncertainties in terms of potential legislative changes and the continued impact of Covid-19 that will impact our forecast – and which will be resolved in the coming weeks and months – the sharp rise in the wholesale market looks set to be the primary driver behind the anticipated increase in the price cap.’

Customers are encouraged to see if they could save money by changing supplier or tariff

Best deals on the market

For those looking to save money on their energy bills straight away, This is Money has compiled a list of the best energy deals currently available.  

The best deal on the market is currently with challenger supplier, Zebra Power, on its Zebra Fixed Rate April 2022 v1 Paperless plan.

The fixed deal will cost an average of £1,000.96 a year but isn’t a green tariff which may deter some customers.

The next best plan is with Avro Energy on its Simple and Select12M deal costing slightly more at £1,010.31 a year. 

Utility Point has the third best tariff – and is also green – with its Just Join Up 21 12M Fixed Wk21 offering at £1,025.05 a year.

Several Big Six suppliers made the list, which is comprised entirely of fixed deals, with EDF, SSE and Ovo making the cut.  

This post first appeared on Dailymail.co.uk