The energy price cap is predicted to rise by five per cent from the current level from January, according to a new forecast.
For a typical dual-fuel household, the Q1 2024 price cap is forecast to rise to £1,931, up from £1,834 per year for a typical consumer, based on analysis by Cornwall Insight.
The price cap is a cap on unit rates and standing charges, meaning people could pay more than the current £1,834 a year cap, if they use more energy.
The firm is currently forecasting the cap will decline from the end of March 2024, subject to the ongoing volatility in the wholesale energy markets, however, it will continue to remain well above historic levels.
The energy price cap is a cap on unit rates and standing charges
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said: “An unstable wholesale energy market, coupled with the UK’s reliance on energy imports, makes it inevitable that energy bills will rise from current levels.
“This leaves households facing yet another winter with bills hundreds of pounds higher than pre-pandemic levels, and affordable fixed deals few and far between.
“The King’s Speech acknowledged that it is our exposure to volatile international energy markets that has led to higher and less predictable bills.
“While we continue to advocate for immediate targeted support for vulnerable consumers, it is evident that the only enduring solution lies in transitioning the UK away from the influence of global energy prices towards sustainable, domestically sourced energy.
“The government’s commitment to attracting record levels of investment in renewable energy sources is a promising step, and ensuring they deliver on this pledge will be paramount in shaping a more stable and affordable energy future.”
Ofgem will announce the official price cap for January to March on Thursday, November 23.
Richard Neudegg, director of regulation at Uswitch.com, said, a week ahead of the price cap announcement, it was a “firm prediction” that energy costs would rise by five per cent for households on standard variable tariffs.
He said: “This price rise will come at the worst time of year for households, who will be using more energy at home during one of the coldest points of the winter.
An energy price rise would ‘come at the worst time of year for households’, Richard Neudegg said
“Consumers on standard variable tariffs are particularly exposed to fluctuations in the wholesale energy market, as the price cap now changes every three months.
“This quarterly price change is piling extra financial uncertainty on consumers, as it’s challenging to budget for a bill when rates can change so frequently.
“Fixed rate deals remain the only way that consumers can secure any certainty about what they will pay for energy for a year.”
However, Mr Neudegg said “more still needs to be done” by the energy regulator to encourage suppliers to offer fixed deals “more widely and at more competitive prices”.
He added: “The price cap is no longer fit for purpose, and the system needs reforming to create a more competitive market, which also protects households.”