Energy bills are projected to increase by over £200 per year for the average household starting in July, with an announcement expected from Ofgem next week. According to Cornwall Insight, the energy price cap set by Ofgem is anticipated to climb to £1,850 this summer, representing a 13% surge from the current annual bill of £1,641.
The spike in prices is attributed to the ongoing conflict in Iran leading to higher wholesale prices after the closure of the Strait of Hormuz, a vital shipping route for approximately 20% of global oil and gas supplies. Cornwall Insight has cautioned that the real concern lies in October when colder temperatures result in increased energy usage, with forecasts indicating a similar level of demand as in July.
Dr. Craig Lowrey, a principal consultant at Cornwall Insight, emphasized that while the summer increase will be challenging for households, the looming worry is the surge in demand typically experienced in October. If the price cap remains at the July level, Lowrey suggested that the government should consider targeted support for the most vulnerable consumers.
Ofgem is set to disclose the July price cap, which will remain effective for three months, on May 27. The price cap does not restrict the total amount paid for energy but establishes the maximum unit rates and standing charges. It reflects the expected annual cost for a household with average energy consumption paying via direct debit.
Consumers on a standard variable rate tariff will be covered by the price cap. Richard Neudegg, director of regulation at Uswitch.com, advised individuals to explore the possibility of saving money by switching to a fixed energy deal before the price rise. Neudegg highlighted that many fixed tariffs currently undercut the predicted price cap, offering potential savings of over £200 for an average household.
To find suitable fixed energy deals, consumers are encouraged to utilize comparison sites by entering their postcode to access the latest tariffs. It is recommended to compare the quoted costs with the current price cap rate, taking into consideration any exit fees.