Two continuing years of unprecedented consumer misery from fuel bills are predicted in latest research from analysts Cornwall Insight.
The respected energy economists this morning release research indicating a typical household dual fuel bill will remain above £3,000 until well into 2024. By summer 2023, average charges will be around £300 per month, or £3,649 per year.
Experts at the Norwich-headquartered consultancy have updated their forecasts for Ofgem’s retail price cap, as likely for 2022’s closing three months and next year’s opening quarter. These now stand – on an annualised basis – as £3,359 and £3,616 respectively.
Today’s predictions are broken down as follows;
Volatility in wholesale markets for gas burned to make power will continue, the firm says, due to uncertainty over Russia’s manipulation of European supplies. But Cornwall stresses its latest predictions indicate the potential longevity, as much as the pain, of high household energy costs.
Factored in to Cornwall’s new numbers are Ofgem’s various live consultations affecting the cap. Most important, say the consultants, is the proposed move to double the frequency of the regulator’s calculations of the cap. Half year calculations will switch to quarterly caps, taking effect from this October.
Also relevant is debate around investment under the RIIO-ED2 regime. That ends on August 22.
Cap calculations switch to quarterly
“Customers will be sadly used to these ever-increasing price cap forecasts”, said Dr Craig Lowrey, Cornwall Insight’s principal consultant.
“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”, Lowry continued.
“However, while the rise in forecasts for October and January is a pressing concern, it is not only the level – but the duration – of the rises that makes these new forecasts so devastating”.
“Furthermore, given the current level of the wholesale price, this level of household energy bills currently shows little sign of abating into 2024.
“While the government has pledged some support for October’s energy rise, our cap forecast has increased by over £500 since the funding was proposed, and the truth is the £400 pledged will only scratch the surface of this problem.
“Our new figures show that even increasing support for October will not make much of a dent in what is likely to be a sustained period of high energy bills. A review of delivering support for the next cap periods should be on the top of the to-do-list for any incoming Prime Minister. As our price cap breakdowns show, tinkering with VAT and policy costs will only make a dent in bills, when it is the high wholesale prices behind the increases.”
Last summer, the dual fuel price cap stood at around £1,200 per year.
Predictions of fuel poverty this winter now extend to as many as one-third of UK households. Moneysaving expert Martin Lewis has repeatedly pressed the government to extend aid beyond the £400 loan per domestic bill, due to take effect in October.