Consumers could see their energy bills rise by30% in the spring if wholesale gas and electricity prices continue to spiral and more suppliers fold, Cornwall Insight warned.
The consultancy’s new report cautions that the energy price cap, hiked to a record £1,277 per year from 1 October, could rise even further, to £1,660 when it is next evaluated in April. That's significantly higher than the £178 price hike Cornwall Insight forecast just two weeks ago.
Craig Lowrey, a senior consultant at Cornwall Insight, said: “With wholesale gas and electricity prices continuing to reach new records, successive supplier exits during September and a new level for the default tariff cap, the Great British energy market remains on the edge for fresh volatility and further consolidation.”
Other market-watchers are more pessimistic, predicting the cap on standard variable tariffs would be raised by £800 to more than £2,000.
A rise in the price cap could push 1.2 to 1.5 million households into fuel poverty, meaning they struggle to afford to heat their homes. charity National Energy Action (NEA) warned.
Ofgem chief executive Jonathan Brearley acknowledged that consumers should brace for a “significant rise” in the cap from April but wouldn’t be drawn on a specific amount.
He confirmed that the price cap will remain at its current level through the winter to protect consumers, despite calls from struggling suppliers that it’s forcing them to sell energy for less than it costs to purchase.
The annual cost of supplying households is thought to be £550 more than the £1,277 charge permitted under the cap.
Dale Vince, boss of green supplier Ecotricity, accused the government of “killing companies” by keeping the retail price cap in place and not similarly capping wholesale prices. Speaking to BBC Radio 4, he said: “It’s illogical to hold prices at one end of the supply chain and not the other end, and the natural consequence is companies going out of business.”
Nine energy suppliers have toppled since August, with more expected to follow as temperatures dip and consumption increases.
While the price cap will keep bills steady for many consumers over the winter, customers of these felled suppliers could see their bills rise by a typical £30 per month as they’re moved to a new company’s standard variable tariff.
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