(qlmbusinessnews.com Fri, 18th Aug, 2023) London, UK —
The anticipated energy price cap announcement by Ofgem next week is projected to bring down the average annual gas and electricity bill to approximately £1,823 starting from October, according to predictions by leading forecaster Cornwall Insight.
The forthcoming price cap adjustment would mark a decrease from the current July to September period, which stood at an average of £2,074 annually. However, consumer advocacy groups have voiced concerns that the cost of energy continues to remain “dangerously high.”
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Analysts expect that bills will experience another increase, rising to an average of £1,979 annually from January. This anticipated surge in costs is attributed to the recent spike in global gas market prices, ignited by planned strikes at significant gas projects in Australia.
Craig Lowrey, a principal consultant at Cornwall Insight, noted that despite the marginal reduction in bills starting from October, energy prices are projected to remain significantly higher than pre-crisis levels. This underscores the “limitations of the price cap as a tool for supporting households with their energy bills.”
The energy price cap was initially introduced in January 2019. However, the global energy crisis spurred by Russia's invasion of Ukraine led to a swift escalation in the cap's value. This escalation prompted the government to introduce its own energy price guarantee. The sharp increase has raised concerns about affordability for numerous households facing fuel poverty, prompting calls for a more affordable “social tariff” aimed at assisting the most vulnerable individuals.
Craig Lowrey emphasized the importance of exploring alternative solutions, such as social tariffs, to ensure the stability and affordability of energy costs for consumers.
Ofgem's chief executive, Jonathan Brearley, recently indicated that a reevaluation of the “very broad and crude” price control system was needed in the midst of the ongoing energy crisis. The price cap, designed to ensure fair energy bills based on suppliers' costs, has contributed to pushing millions into fuel poverty due to the record energy price rates.
The anticipated price cap announcement by Ofgem is anticipated to reflect the modest decline in unit prices for gas and electricity, driven by a drop in global gas market prices from their record highs in the previous year. The calculation of the average energy bill is also being adjusted, assuming reduced electricity usage by 7% and decreased gas consumption by 4%. Without this adjustment, the October price cap would be nearly £100 higher, reaching £1,925, according to Cornwall Insight.
Simon Francis from the End Fuel Poverty Coalition expressed concerns about the persistently high energy bills and highlighted the challenging winter ahead for many households.
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It is important to note that the energy price cap only establishes the maximum charge per energy unit, based on a typical home's annual consumption. The actual dual-fuel bill for a household will depend on their individual gas and electricity usage.
Cornwall Insight's forecasts suggest that under the new price cap, the unit price for electricity will decrease from 30p per kilowatt hour to 26.96p/kWh, while the unit price for gas will drop from 8p/kWh to 6.93p/kWh.
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