Cornwall Insights predicts Ofgem will announce a 1 per cent increase in the price cap on August 27.
Household energy bills are set to rise by around 1 per cent in October despite lower wholesale costs, according to new forecasts. The typical household energy bill is expected to rise by £17 to £1,737 per year when regulator Ofgem’s new price cap comes into force, experts at Cornwall Insight have predicted.
Ofgem, which sets the limit on what energy companies can charge customers, is due to confirm its latest price cap on August 27.
Consumer group Which? is encouraging energy customers to “shop around” for a fixed energy deal before the announcement and recommends “looking for deals cheaper than the current price cap, not longer than 12 months and without significant exit fees”.
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Cornwall Insight’s latest prediction is a turnaround from its previous forecast in July that bills would drop by 1 per cent from the current £1,720 in October due to easing Middle East tensions.
Cornwall said its forecast reflected changes it assumed Ofgem would be introducing in the upcoming cap period, including the expansion of the Warm Home Discount scheme for vulnerable households that would add around £15 to a typical bill, while also providing £150 in support to 2.7 million additional people.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “News of higher bills will not be welcomed by households, especially as winter approaches.
“While the added costs behind this forecasted rise are aimed at supporting those most in need, it does mean typical bills will increase despite relatively lower wholesale costs. It’s a reminder that the price cap reflects more than just the market price of energy.
“This immediate challenge underscores a broader uncertainty facing millions of households, with current forecasts suggesting a sharp drop in bills is unlikely in the near term.
“Longer term, Ofgem’s review of how Britain’s energy system costs are distributed could reshape the financial burden on consumers, but while some may see savings, others could face higher charges.
“The real hope for lasting relief lies in the longer-term transition towards clean power and energy independence, which offers the greatest prospect of both stability and lower costs.”
Emily Seymour, Which? Energy Editor, said: “With prices predicted to remain at similar levels to the current price cap over the autumn, energy customers could find that it’s a good time to shop around for fixed deals. As a rule of thumb, we’d recommend looking for deals cheaper than the current price cap, not longer than 12 months and without significant exit fees.
“If you are on a fixed deal from earlier in the year which leaves you paying more than the current price cap then you might be considering switching early. Check whether your contract has exit fees – if yours has no or low fees it could be worth changing to a new tariff. Some contracts charge large fees to leave early, which would cancel out any savings.”
A Department for Energy Security and Net Zero spokesman said: “The only way to bring down energy bills for good is with the Government’s clean energy superpower mission, which will get the UK off the rollercoaster of fossil fuel prices and on to clean, homegrown power that we control.
“We are taking urgent action to support families this winter – in addition to expanding the £150 Warm Home Discount to 2.7 million more households, we are strengthening customer protections, including by giving people quicker and easier access to automatic compensation when their suppliers let them down.”
Ofgem changes the price cap for households every three months, largely based on the cost of energy on wholesale markets.
The energy price cap was introduced by the UK Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in Scotland, England and Wales for each kilowatt hour (kWh) of energy they use.
It does not limit total bills, because householders still pay for the amount of energy they consume.