Experts are warning that energy bills for millions of UK households could increase by up to £1,800 per year in July due to the ongoing conflict in the Middle East. Cornwall Insight, an industry specialist, predicts that regulator Ofgem may need to raise its price cap by 10% to account for the rising wholesale costs.
The current price cap is set to decrease from £1,758 to £1,641 annually for the typical household starting from April 1, representing a 7% reduction. However, the actual amount paid by households will vary depending on their energy consumption levels.
A significant factor contributing to the anticipated price hike is the overall surge in global gas markets, with the UK being particularly vulnerable as a net importer, according to Cornwall Insight. This increase will not only impact gas bills but also electricity bills, given the UK’s reliance on gas prices for determining power costs.
While the final decision on the July price cap by Ofgem is pending, it is crucial to consider the fluctuations in wholesale prices over a three-month period before setting the cap. Dr. Craig Lowrey, a principal consultant at Cornwall Insight, emphasized the importance of reducing reliance on global gas markets through increased renewable energy generation to shield households from future price shocks.
Responding to the speculations, a government spokesperson cautioned against relying on short-term wholesale price changes to predict future energy bill trends. The spokesperson reiterated that the current price cap is fixed until the end of June, with bills expected to decrease during this period due to government initiatives. The government emphasized the need to transition away from fossil fuel markets to mitigate the impact of price fluctuations on consumers.
