The household energy price cap is forecast to rise by £209 a year from July, driven by the fallout from the Iran war. Experts warn of an impending payment shock in autumn when demand surges during cooler months.
Cornwall Insight Forecast
Cornwall Insight reports that its prediction for Ofgem's cap from July to September now stands at £1,850 for a typical dual fuel household. This represents a 13% increase compared to April's annual cap of £1,641. The latest forecast is slightly higher than the 12% increase projected last month.
While households may be frustrated by a summer rise, the impact is tempered as energy usage typically falls in hotter months. However, the bigger concern is October, when demand picks up. Current forecasts point to a similar cap level as July, depending on the unfolding Middle East conflict. Even if the conflict ends immediately, physical damage to infrastructure and lingering supply disruptions mean a return to April's price cap levels in autumn appears unlikely.
Market Volatility and Government Response
Wholesale markets have been highly volatile since the conflict began in late February. At one stage, Cornwall Insight predicted annual household energy bills could surge by as much as £332 to £1,973 from July. Energy costs have rocketed due to Iran blocking the crucial Strait of Hormuz shipping route, which carries a fifth of the world's oil and gas.
Craig Lowrey, principal consultant at Cornwall Insight, noted that forecasts have shifted from virtually no quarter-on-quarter increase to a 13% rise due to the Middle East conflict. He added that if October's cap remains similar to July's, the government must consider targeted support for the most vulnerable.
Call for Action
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, warned that if bills remain high when heating season begins, millions of households already in energy debt or struggling to keep homes warm will face an extremely difficult winter. He urged the government to act before winter to spell out what support will be available.
Ofgem adjusts its price cap every three months and will announce the next level for July to September on May 27.
