Energy bills for millions of households in the UK are at risk of increasing by £160 to £1,800 annually in July due to the ongoing conflict in the Middle East, as per experts’ predictions from industry specialists Cornwall Insight. The forecast suggests that regulator Ofgem may need to raise its price cap by 10% to accommodate the soaring wholesale costs.
Starting April 1, the price cap is set to decrease from £1,758 to £1,641 per year for the average household, marking a 7% reduction of £117. The actual amount paid by households varies based on their gas and electricity consumption levels. A substantial portion of the upcoming decrease is attributed to a £150 saving announced in the recent Budget by Chancellor Rachel Reeves. However, any potential increase linked to the Middle East conflict could nullify this benefit.
Cornwall Insight highlights that the anticipated rise in the price cap during Ofgem’s next review reflects a broader surge in global gas markets, with the UK being a net importer. The impact of these price hikes extends beyond gas bills to electricity bills, given the UK’s reliance on gas in determining power prices.
While caution is advised since Ofgem is still in the early stages of determining the July price cap, Dr. Craig Lowrey, principal consultant at Cornwall Insight, emphasizes the significance of international market movements in shaping UK households’ energy costs. He underscores the importance of investing in domestic renewable energy sources to mitigate exposure to volatile global gas markets and shield households from future price fluctuations.
Responding to these predictions, a government spokesperson emphasized the speculative nature of short-term price forecasts, highlighting that the current price cap remains fixed until the end of June, ensuring reduced energy bills for households during this period. The spokesperson advocated for reducing dependence on fossil fuel markets to mitigate the impact of price fluctuations on consumers.
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