The excruciating pain already showing itself in Britain’s homes from now quarterly rises in Ofgem’s price cap on home energy, is set to increase, latest calculations released this morning by respected independent consultants Cornwall Insight predict.
Cornwall’s forecast now for the price curb’s revision covering January and beyond has risen by £650 since last calculated only last week, it revealed. That means a typical household is now predicted to pay the equivalent of £4,266 a year for the three months to March 2023.
Forecasts for the October cap have also seen a rise, going up by over £200, with predictions for an average bill now sitting at £3,582. In two weeks, Ofgem will release its definitive cap value for this year’s final quarter.
Cornwall Insight’s energy economists base their numbers on assessments of wholesale energy trading reported by industry sources, taken against their in-house view of non-wholesale components of domestic bills.
Today’s forecast uses wholesale closing prices from last Friday, alongside outcomes of Ofgem’s consultations on the reform of the cap as announced by the regulator the day before.
“As this is a snapshot, we would anticipate volatility to be present in the forecasts due to movements in wholesale prices and how this feeds through to the calculations given the underlying Ofgem model”, Cornwall’s briefing note says today.
Figure 1: Cornwall Insight’s default tariff cap forecasts, £ per year including VAT (- dual fuel, direct debit customer, national average figures)
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“While our price cap forecasts have been steadily rising since summer 2022’s cap was set in April, an increase of over £650 in the January predictions comes as a fresh shock”, principal consultant Dr Craig Lowrey remarked today.
“The cost-of-living crisis was already top of the news agenda as more and more people face fuel poverty, this will only compound the concerns”.
Questioning if the cap remained fit for purpose, Lowrey added:
“Many may consider the changes made by Ofgem to the hedging formula, which have contributed to the predicted increase in bills, to be unwise at a time when so many people are already struggling. However, with many energy suppliers under financial pressure, and some currently making a loss, maintaining the current timeframe for suppliers to recover their hedging costs could risk a repeat of the sizable exodus seen in 2021”.
Cornwall Insight have been consistent among Cassandras regarding the pain yet to come in consequence of the re-awakening world’s need for gas, and its supply constraints resulting from Vladimir Putin’s onslaught on Ukraine.
Last week its analysts predicted the retail cap will remain above £3,000 for several months into 2024. It currently stands at £1,971 on a yearly basis, before an increase certain to be announced in two weeks’ time.
Over half of Britain’s population, equivalent to 15 million households will be in fuel poverty by January – defined as spending more than 10% of income on electricity and heating –, University of York researchers had predicted separately yesterday.
Pensioner couples, lone parents and more than 80% of large families will be worst affected, the York academics found.
Debt counsellors Citizens Advice were quick to comment on the suffering already arising from Cornwall’s observations.
Morgan Wild, the independent body’s head of policy, called for an immediate rise in benefits, to keep pace with rising prices.
“There’s no time to waste,” Wild said. “The cost-of-living crisis is already having a devastating impact on people’s lives. Every day we hear from people who can’t afford to turn the lights on or cook their kids a hot meal.
“The government did the right thing by bringing in targeted support, but it won’t be enough for people to manage these previously unthinkable price hikes”.
Other critics that, amid rocketing household bills, lame-duck premier Johnson’s Conservative government is in office, but not in power.
The disgraced 30-month departing prime minister returned at the weekend from a week’s inactivity while on honeymoon, without commenting on the fuel crisis. Newbie chancellor Nadim Zahawi is on holiday, but working, according to a spokesperson. No statement has resulted, a fact criticised by CBI boss Tony Danker and former premier Gordon Brown.
Two years ago at the start of dramatic price rises for wholesale gas, the deludedly boosterish Johnson described them as a ‘temporary problem’.
Recent Johnson ministers Liz Truss and Rishi Sunak, now warring as candidates to replace him, have pledged palliatives criticised by observers as inadequate, as they court an estimated 160,000 party voters, predominantly comfortably off. Refusing any further so-called ‘handouts’, Truss instead seeks suspension of the green levies included in bills, and scrapping Sunak’s announced rises in national insurance charges
LibDem leader Sir Ed Davey stole former Chancellor Sunak’s electoral clothes at the weekend, calling for a ‘fuel furlough’. The former energy secretary called for a cancellation of October’s planned raising of the cap to £1,400, and for its £36 billion cost to be met directly from public funds.
“We are facing a catastrophe this winter, a drop in living standards unlike anything we have seen in my lifetime,” the former energy secretary observed.