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As the energy crisis, which has seen wholesale gas prices quadruple in the last 12 months, continues, millions of households can expect their energy bills to rise again when energy regulator Ofgem next reviews the price cap.
Analysts at Cornwall Insight expect that the energy price cap will increase from the current figure of £1,971 per year based on typical use, to £3,500 – an increase of 78%.
Dr Craig Lowrey, Principal Consultant for Cornwall Insight, says: ‘The latest developments regarding further disruption to Russian gas flows to Europe have led to another jump in wholesale energy markets such that our default tariff cap forecasts for the winter period (Oct 22-Mar 23) is now averaging over £3,500 for a typical household, or almost £300 per month, and that this will remain the case until well into 2024.’
But when will we know exactly how much the price cap is set to increase by?
When will Ofgem announce the October energy price cap?
Ofgem will announce the October energy price cap on 26 August 2022, and changes will come into effect on 1 October. The current cap was announced on 3 February and came into effect on 1 April.
Speaking of the April price cap, Jonathan Brearley, chief executive of Ofgem, said: ‘The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas.
‘Ofgem is working to stabilise the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future.’
Currently, Ofgem reviews the price cap twice a year, February and August, with changes implemented in April and October. But with the volatility of the energy market, it has proposed that the cap be reviewed every three months instead of every six. Although not yet confirmed, this would mean that customers would see less steep hikes, and should the price of wholesale gas drop, these savings could quickly be passed on to customers.
Until the official announcement is made, predictions will continue to circulate. We’ll keep our energy calculator updated with the latest data so you can see how your energy bills from October onwards could be affected.
The news of further energy price hikes will not be welcome, with household budgets under increasing pressure amid the cost of living crisis. However, when the new price cap kicks in, almost every household will benefit from a £400 energy rebate on their bills to help ease some of the pressure as we head into the winter months.
What can I do to keep my energy bills as low as possible?
When the energy market is stable, switching your provider is a good way to reduce your energy bills, but with wholesale prices affecting all suppliers, there is no benefit to switching right now.
You could try switching to a fixed-rate tariff. Some suppliers are offering their customers fixed-rate deals that are more than the current price cap, but could be less than that the new cap. The idea is that you could fix, pay a little more between now and October, and then either save or breakeven against what you would have paid should you have stayed on your providers Standard Variable or default tariffs and been impacted by the price cap increase. But this won’t be the solution for everyone, and fixing now is a gamble.
The best way to keep your bills as low as possible is to reduce how much energy you use. There are lots of ways you can save energy at home, including not leaving appliances on standby, making use of eco modes on dishwashers and washing machines, and drying clothes outside instead of using a tumble dryer. When the winter rolls around, turning your thermostat down by a single degree can lead to sizable savings.