Household energy bills could increase by £288 a year in July, according to latest forecasts (Image: Getty)
UK households are facing a potential £24 monthly increase on their energy bills from July thanks to soaring wholesale costs. In a fresh warning today (March 31, Cornwall Insight issued its latest prediction for Ofgem’s price cap from July to September which could see household energy bills rise by £288 per year. The predicted price cap from July now stands at £1,929 for a typical dual fuel household, which is an 18% increase on April’s cap at £1,641 per year.
Despite the latest forecast being a slight fall from its prediction early this month, which was estimated to hit £1,973 in July, it is still a significant increase and would mean a monthly bill increase of around £24 for households. £24 is the average amount that the annual price cap works out at as a monthly figure, but as the price cap changes every three months, the actual monthly averages for the year may differ.
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But Ofgem’s price cap only sets the maximum rate per unit and standing charge that customers can be charged by suppliers when they’re not on a fixed tariff – not the total bill. So ultimately, those who use more energy will pay even more.
Cornwall Insight warned a rise in the price cap in July was “effectively unavoidable” due to rocketing wholesale energy prices over March, caused by the war in Iran.
These inflated prices are now locked into the calculation and there is little chance they will fall below pre-war levels in the coming weeks, according to the analysts.
The price most households pay for energy will fall from April by 7%, or £117 per year, to £1,641, driven by the government’s promise to cut bills by an average of £150 by removing green subsidies.
Craig Lowrey, principal consultant at Cornwall Insight, said: “A rise in July is pretty much unavoidable, but how high prices go remains to be seen.
“There is some relief in the timing, summer is when energy demand is at its lowest, which should soften the impact on household energy expenditure.
“If higher wholesale prices continue, it will be the effects on the October cap that have the most impact, and that is when the question of government support for households is likely to be revisited.”
Ofgem is due to confirm its next price cap level by May 27, which will affect households in England, Wales and Scotland on standard variable tariffs, including those on default tariffs and prepayment meters.
The prospect of a significant jump in gas and electricity costs when the cap is updated in July has prompted the government to look at further targeted support.
The Conservatives have called on the government to take urgent action by cutting VAT, taxes and levies off energy bills, while energy experts have made calls to accelerate clean energy development.
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “Households are staring at another energy bill shock after a brief fall in prices from April 1. This represents a £288 ‘Trump Tax’ added to energy bills because of the impact of the conflict in the Middle East on oil and gas prices.
“For the millions of households already in energy debt, this will be a real worry and risks pushing more people into crisis.
“Ministers must prepare to use increased Windfall Tax receipts to act. That means targeted support for households hit first and hardest, including those off the gas grid and on heat networks, alongside faster action on energy debt and preparations to bring down costs if prices spike further.
“But we cannot keep letting history repeat itself. The only way to break this cycle is to ramp up energy efficiency, roll out homegrown renewables and fix electricity pricing so households see the benefit of cheaper clean power.”