New energy price cap forecast to be higher than previous expectations

Energy tariffs

Ofgem’s price cap is likely to be higher than previously thought when it changes again in July, experts have said.

Energy consultants Cornwall Insight said they expect the typical household’s energy bill to be around £1,560 per year from July, rising further to £1,631 from October.

That is around 7% higher than the consultancy’s previous forecast from around a month ago.

While no household will want to see forecasts rising, it’s important to recognise that these do still represent a fall from the new cap coming in from April, itself a large drop

Dr Craig Lowrey, Cornwall Insight

Ofgem changes the price cap every three months based on several factors, the most important of which is the price of energy on wholesale markets.

Wholesale prices recently hit their lowest point for a quarter of a decade, but have risen a little in recent weeks.

Despite the hikes to the forecast, both would be lower than the price cap that comes into force on Monday, which is set at £1,690 per year.

That in turn is already lower than current bills.

The price cap does not limit a household’s total bills, people still pay for each unit of gas and electricity they use, the figures provided are just for an average-use household.

Cornwall’s forecast also said that bills will only rise by around £3 when it changes in January next year.

“With wholesale prices hitting a two-and-a-half-year low, it was only a matter of time before a slight rise occurred as the market stabilises,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.

“Changes from Ofgem have also left their mark on the price cap, with those paying via direct debit due to see a small cost in order to level the playing field for prepayment customers.

“While no household will want to see forecasts rising, it’s important to recognise that these do still represent a fall from the new cap coming in from April, itself a large drop.

“So there is every reason to remain optimistic for energy bills moving forward.”

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