UK energy bills could be about to rise by more than anyone imagined and push thousands more households into fuel poverty, a leading expert has warned.
Dr Craig Lowrey from Cornwall Insight, a consultancy group, predicted that a typical household can expect to pay the equivalent of £4,266 in energy costs for the three months to March 2023.
According to the organisation, “forecasts for the October cap have also seen a rise, going up by over £200, and with predictions for an average bill now sitting at £3,582.”
Mr Lowrey explains: “The increase in our forecasts since last month reflects both the increase in the wholesale market in the intervening period and – crucially in the case of the Q1 2023 (Jan-Mar) and Q2 2023 (Apr – Jun) forecasts – a change in calculation methodology set for finalisation by Ofgem.
“In its initial proposals from May, the regulator [Ofgem] stated that an element of supplier costs associated with wholesale market hedging would be explicitly included within the cap methodology and would be recoverable over a 12-month period.
“However, in the consultation documents released last week, it was confirmed that these costs would be recoverable over a six-month period – resulting in higher bills than previously forecast for the crucial January cap.”
He continued: “While our price cap forecasts have been steadily rising since the Summer 2022 cap was set in April, an increase of over £650 in the January predictions comes as a fresh shock.
“The cost-of-living crisis was already top of the news agenda as more and more people face fuel poverty, this will only compound the concerns.”
Mr Lowrey questioned the purpose and reasoning for the energy price cap, arguining that “it may be time to consider the cap’s place altogether.”
He said: “After all, if it is not controlling consumer prices, and is damaging suppliers’ business models, we must wonder if it is fit for purpose – especially in these times of unprecedented energy market conditions.”
Lowrey called on the UK government to improve the financial support given to low-income households who are struggling to stay on top of their energy bills.
“If the £400 was not enough to make a dent in the impact of our previous forecast, it most certainly is not enough now,” he said.
“The government must make introducing more support over the first two quarters of 2023 a number one priority.
“In the longer-term, a social tariff or other support mechanism to target support at the most vulnerable in society are options that we at Cornwall Insight have proposed previously.”
Returning to the issue of the price cap, Mr Lowrey added: “Right now, the current price cap is not working for consumers, suppliers, or the economy.”
Responding to the latest Cornwall Insight price cap forecast, Morgan Wild, Head of Policy at Citizens Advice, says: “The cost-of-living crisis is already having a devastating impact on people’s lives.
“Every day we hear from people who can’t afford to turn the lights on or cook their kids a hot meal.
“The government did the right thing by bringing in targeted support, but it won’t be enough for people to manage these previously unthinkable price hikes.
“The obvious place to start is to increase benefits to keep pace with the cost of living. There’s no time to waste.”