Household energy bills are expected to increase once again in the run-up to winter, with a 9% rise projected for the price cap in October, according to industry experts.
Cornwall Insight, a consultancy known for its accurate predictions, forecasts that a typical household using a standard amount of gas and electricity will pay £1,714 per year from October onwards. This represents a £146 increase compared to the current annual bill, which stands at £1,568 - the lowest it has been in two years.
The Energy regulator, Ofgem, will officially announce the new quarterly price cap on Friday, prompting concerns from charities about the impact of another price rise on already struggling households.
It's important to note that the price cap is adjusted every three months but is presented by Ofgem as an annual bill for a household with typical energy consumption. Therefore, larger properties will likely face higher overall costs due to increased energy use, while smaller properties will pay less. This is because the cap limits the maximum price per unit of gas and electricity, not the total bill.
This price cap affects 28 million households across England, Wales, and Scotland. Energy regulation is managed separately in Northern Ireland.
Cornwall Insight attributes the expected price rise to volatility in the global energy market, which is still recovering from the disruption caused by the war in Ukraine. Wholesale energy costs, which are borne by suppliers, have increased by about 20% in recent months. These costs are ultimately reflected in consumer bills, accounting for approximately half of the total price.
With prices set to rise, some billpayers may consider fixing their energy tariff to provide certainty. However, Cornwall Insight notes that the average saving from the top 10 cheapest fixed tariffs available in August was only £5 per year compared to the default price cap tariff. While this saving may increase in the coming weeks, Richard Neudegg from price comparison website Uswitch advises caution: "Just because it is a fix, it doesn't mean it is a good price fix. The question for consumers is, if they want that level of certainty, how cheaply can they get it."
Looking ahead, Cornwall Insight anticipates further price increases during the winter, with a "modest" rise expected when the January price cap is announced. However, ongoing tensions in the Russia-Ukraine war could lead to even higher prices.
"While we don't expect a return to the extreme prices of recent years, it's unlikely that bills will return to what was once considered normal. Without significant intervention, this may well be the new normal," stated Craig Lowrey, principal consultant at Cornwall Insight.
Charity National Energy Action warns that any price increases, coupled with reduced government support, could push some households' finances "beyond breaking point."
Standing charges, which are a fixed daily fee covering the costs of connecting to a supply, currently range from 60p per day for electricity to 31p per day for gas, although they vary by region. Ofgem is currently reviewing the standing charge billing system.
While energy bills are considerably lower than their peak following Russia's invasion of Ukraine, when government interventions helped limit bill increases, they remain significantly higher than pre-pandemic levels.
Tips for Reducing Energy Consumption and Bills:
Experts recommend several strategies for managing energy use during the warmer months:
Check your hot water temperature: If your hot water is too hot to wash your hands in, the temperature setting is too high. Turn the boiler down to save energy.
Tackle draughts: Seal up any draughts by using a black bag with scrunched-up paper in an unused chimney or addressing other drafts around the home.
Limit shower time: Aim for four-minute showers. WaterAid has compiled a playlist of four-minute songs to help you stay on track.
For further support on managing energy bills, please refer to the BBC News article: [link to relevant article]