Cornwall Insight has revised its prediction for Ofgem’s energy price cap for the period between July and September, now estimating it to be £1,837 for a typical dual fuel household. This marks a 12% increase compared to the cap set for April.
In early March, Cornwall Insight had projected an even higher rise, forecasting an increase of £332, pushing the annual household energy bills to £1,973 when the next cap comes into effect.
The lower-than-expected rise reflects a slight decrease in wholesale energy costs after the initial price surges that occurred at the start of the war, around February 28. However, energy markets remain volatile, and British households are still expected to face significant hikes in gas and electricity prices as the ongoing Middle East conflict continues to drive up wholesale energy and oil prices.
Cornwall Insight previously warned that a rise in the cap in July is practically inevitable, as soaring wholesale prices have already been factored into the calculations, and it’s unlikely they will return to pre-war levels in the near future.
Ofgem is scheduled to announce the new price cap level by May 27.
Between April and June, Ofgem lowered the cap by 7%, reducing it to £1,641. This was partly due to the Government’s intervention to reduce bills by an average of £150, achieved by removing green energy subsidies.
The expectation of a significant increase in gas and electricity costs when the cap is updated in July has prompted the Government to indicate that it will explore further targeted support as part of contingency planning efforts.
This week, the Government also extended its electricity bill support scheme to 10,000 businesses. This measure provides some relief to companies, as they are not covered by the household energy price cap.
Experts suggest that wholesale energy prices are unlikely to return to pre-war levels until the reopening of the Strait of Hormuz, a vital passageway through which a fifth of the world’s oil and seaborne gas is transported. The ongoing conflict and disruptions to energy infrastructure across the Middle East have caused gas prices to spike, with crude oil reaching as high as 120 US dollars per barrel at one point since the conflict began.
