Gas Bills Could Nearly Double in 18 Months, Fuel Poverty Charity Warns

Brits should brace for further energy bills hikes in the spring, which will take fuel costs to double what they were in October 2020, National Energy Action (NEA) warned.

Wholesale natural gas prices are currently at record highs, with costs per therm six times higher than they were in December 2020. Some of these costs were passed onto consumers when the energy price cap, which limits how much suppliers can charge households on standard variable tariffs, was increased to £1,277 on 1 October. 

But the cap—its current level calculated in August, when gas prices were on an upward trajectory but not yet astronomical—has shielded households from most of the surge in gas prices.

That will change in April when the cap is next adjusted. The new level will account for suppliers’ soaring wholesale costs, Ofgem has said. The regulator's chief executive Jonathan Brearley said in October that the price cap exists to prevent suppliers from making unfair profits but “legitimate costs have to be passed through.”

The regulator is also consulting on plans to adjust the cap more regularly to reflect volatility in wholesale energy markets, meaning households should expect their bills to move up and down more frequently.

Forecasts for the April price hike range from £400 and £600. Market researcher Cornwall Insight predicted in October that the cap would rise 30% to £1,660 per year for a dual-fuel household.

Fuel poverty charity NEA is even more pessimistic, suggesting that Brits could be paying £550 more for electricity in April. That includes a £350 increase in the price of average gas bills and a £200 increase in average electricity bills. 

The increase will take average annual gas bills to £944, double the average £467 in October 2020.

Wholesale electricity prices will also rise because Britain continues to use gas to generate around 40% of its electricity. Low wind levels, nuclear outages, and a fire at a subsea electricity cable to France have also contributed to tight electricity supplies and high prices.

NEA warns that households are already struggling with the highest cost of living in a decade, driven by these high energy bills, and that for many a further hike in fuel bills could be disastrous.

Adam Scorer, chief executive of NEA, said: “Bills have increased by well over £230 since last winter and millions now face a daily heat or eat dilemma. We estimate energy bills will rocket again in April, doubling the average householders’ heating bills since last year.

“For people already on a budgetary knife-edge, the cost of keeping a family warm has exploded while budgets have collapsed. No amount of useful tips or savvy shopping can cope with that.”

Energy UK, the trade association representing Britain’s energy suppliers, said households struggling to afford their fuel bills should contact their suppliers.

"Suppliers have put forward more support for customers who might be struggling with their bills this year, and we are currently working with consumer groups to help raise awareness of the help that is available,” Energy UK chief executive Emma Pinchbeck said.