Domestic energy bills in Britain will remain at “devastating” levels into 2024 and potentially beyond, analysts are predicting, adding pressure on the government to provide further financial aid to cash-strapped households.
Energy consultancy Cornwall Insight has warned there is little relief in sight for households struggling with soaring electricity and gas costs as it forecast Britain’s energy price cap was likely to remain “significantly” above £3,000 a year on average until “at least 2024”.
The group, which has been among the most accurate forecasters of British energy prices, is estimating the cap will hit nearly £3,360 a year in October when it is next altered by the regulator Ofgem, and will remain relentlessly high throughout 2023 and into 2024.
The energy price cap dictates bills for more than 23mn households and provides an estimate based on average use. October’s forecast marks a 70 per cent increase on the current level of £1,971 a year and would represent a 163 per cent rise in bills compared with last winter. Ofgem is due to announce the October level at the end of August.
Cornwall Insight believes the cap could exceed £3,600 in January before hitting a peak of nearly £3,730 in the second quarter of 2023. It is likely to remain elevated, at around £3,470 a year, at the end of 2023, according to the group’s latest forecasts, as forward energy contracts suggest there will be little let-up in the high wholesale gas and electricity prices that have been driving domestic bills higher, particularly following Russia’s invasion of Ukraine.
“While the rise . . . for October and January is a pressing concern, it is not only the level — but the duration — of the rises that makes these new forecasts so devastating,” said Craig Lowrey, principal consultant at Cornwall Insight. “Given the current level of the wholesale price, this level of household energy bills currently shows little sign of abating into 2024.”
Although some of Cornwall Insight’s forecasts for October and January are lower than other recent estimates, the group is among the first to predict that soaring energy prices will continue to hit consumers’ pockets until 2024 and possibly even longer.
The warning triggered fresh pleas from fuel poverty campaigners and opposition politicians to boost financial aid for households already struggling with a surge in the cost of living.
Conservative leadership contender Rishi Sunak in May announced a fresh package of support for households to be delivered in the autumn, including £400 off all households’ energy bills. However, critics pointed out on Tuesday that forecasts for October’s price cap had risen by more than £500 since that £400 relief was announced.
Based on Cornwall Insight’s latest estimates, the charity National Energy Action said a further 2mn households could be plunged into fuel poverty this winter, where surging energy bills mean people cannot afford to live in a warm, dry home.
Opposition MPs and environment groups pressed the Conservative party leadership contenders to increase the government’s windfall tax on oil and gas producers after BP reported its highest quarterly profit in 14 years on Tuesday.
“We need to see urgent changes now to help people with their bills this winter and the government’s windfall tax must cover these profits to help fund it,” said Sarah Olney, business spokeswoman for the Liberal Democrats.