Households are set to find out how much energy bills will increase by from July when the price cap is updated as forecasts point to a rise of more than £200 and a painful winter of sky-high bills ahead due to the Iran war.
Regulator Ofgem will on Wednesday reveal the level of the annual energy price cap for July to September for a typical dual fuel household across England, Scotland and Wales.
Analysts Cornwall Insight predicted last week that the cap will rise by £209 a year to £1,850 from July 1 – an increase of 13% on April’s £1,641 annual cap.
It sets a maximum price per unit of gas and electricity used, meaning households only pay for the amount of energy they use.
This means households will be largely shielded over the warm summer months, but concerns are growing over a painful hit when the cap is reviewed in October and energy demand rises as temperatures drop.
Cornwall Insight’s forecasts suggest the cap in October will be at a similar level to July, even if the Middle East conflict were to end soon, due to the physical damage to infrastructure and lingering effect of disrupted supply.
Calls have been mounting for the Government to set out action to support the most vulnerable, but Chancellor Rachel Reeves stopped short of any immediate energy measures in her cost-of-living plan.
She told MPs last week: “We stand ready to act if market conditions worsen significantly later this year and I have been leading cross-Government contingency work on design of potential future targeted and temporary support for businesses.”
Energy costs have been sent rocketing higher by Iran’s move to block the crucial Strait of Hormuz shipping route, through which a fifth of the world’s oil and gas is carried.
Households have yet to feel the impact, as the price cap is reviewed on a quarterly basis, and April saw a 7% drop thanks to Government measures to reduce bills.
This included moving 75% of the cost of the UK’s renewables obligation from household bills on to general taxation, and scrapping the energy company obligation scheme.
Campaigners have warned over an “extremely difficult winter” ahead for the most vulnerable without extra support on bills.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Households need reassurance and support, not a summer of suspense.
“That means the Government must act before winter to spell out what support will be available.”
The Government has insisted that “tackling the affordability crisis is our number one priority”.
Its package of support measures so far includes a cut in the rate of VAT on attraction tickets over the summer holidays, free bus travel for children in England during August, extending the 5p-per-litre fuel duty reduction and lowering import tariffs on more than 100 types of food products.
But the lack of further action on energy bills is seen as holding back spending by cash-strapped consumers.
Economist Martin Beck, at WPI Strategy, said recent official figures showing lower retail sales in April was already a sign that “energy pressures are biting”.
“Higher petrol prices, the prospect of an increase in household energy bills in July and weakening consumer sentiment all point to a more cautious spending backdrop,” he said.
