Energy price cap will now be higher than previously forecast next year, Cornwall Insight says – here’s why

Energy bills could rise faster than expected due to war, strikes and likely sabotage, experts have said – by £89 to £110 a year.

The average home currently pays £1,834 a year for gas and electricity bills as they are on a tariff regulated by the Ofgem price cap, which is set four times a year.

Expert energy analysts at Cornwall Insight previously thought the typical energy bill would rise slightly by £63 in January 2024, then stay below the current £1,834 level for the rest of 2024.

But Cornwall Insight’s latest predictions are for the Ofgem price cap to rise from £1,834 now to £1,923 in January – an increase of £89 a year, rather than £63.

Grim tidings: Expert analysts believe household energy bills could go up again next year

From April 2024, Cornwall Insight thinks the price cap will rise slightly to £1,929, £110 a year more than it predicted in September.

Then from the third quarter of 2023 the average energy bill will fall to £1,879, Cornwall Insight thinks, £98 more than its earlier predictions.

In the final three months of 2024 the typical household will pay £1,916 in gas and electricity bills, a rise of £91 on Cornwall Insight’s earlier assessments.

Why are energy bill forecasts changing?

Cornwall Insight said it had increased its forecasts for several reasons.

The war between Israel and Hamas, industrial action at Australian gas production facilities and possible sabotage to the Scandinavian Balticconnector gas pipeline are all affecting global energy price expectations, Cornwall Insight said.

Why have I seen two figures for the Ofgem price cap?

There are two figures for average energy use for the October 1 price cap – £1,923 and £1,834
The reason is that from October 1, Ofgem not only changed the price cap but also what it calls average energy use
This is because consumers have been using less energy than the regulator thought
Using the old assumptions, the price cap fell from £2,074 a year to £1,923 on October 1
The £1,834 figure is far lower than £1,923, but does not mean consumers are magically being charged that much less than they were

Craig Lowrey, principal consultant at Cornwall Insight, said: ‘The jump in price cap predictions since September has once again highlighted the vulnerability of UK energy prices – and customer bills – to geopolitical events.

‘The Russian invasion of Ukraine demonstrated there is a delicate balance in the global energy market which can easily be disrupted by unexpected events, it looks as though the current situation is repeating that pattern.’

Richard Neudegg, director of regulation at Uswitch.com, said: ‘As temperatures fall and we start to use more energy at home, predictions that energy prices might rise will cause real nervousness in households on the standard variable tariff.

‘Cornwall Insight’s revised predictions on where the price cap could go reflect an increased level of uncertainty in the wholesale market.’

Regulator Ofgem does not make predictions about how the price cap will change in the future, although chief executive Jonathan Brearley has previously warned customers that he ‘Can’t offer any certainty that things will ease this winter’.

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