The energy industry has issued an urgent plea for the Government to implement immediate measures to shield vulnerable households from potential bill increases of up to £250 annually, as geopolitical tensions in the Middle East threaten to destabilise wholesale gas markets.
Projected Price Surge Linked to Iran Conflict
Energy UK, the leading trade association for the energy sector, has revealed that suppliers' latest projections indicate customers could face an annual increase of as much as £250 on their energy bills. This forecast stems from the ongoing military conflict involving the United States, Israel, and Iran, which has injected significant volatility into global energy markets.
While the industry body cautioned that it remains too early to predict the precise impact with certainty, the warning underscores growing concerns about affordability for millions of households across the United Kingdom.
Analysts Predict Double-Digit Percentage Increases
Independent analysts at Cornwall Insight have forecast that household energy bills could rise by more than 10% starting in July. This projection follows sharp increases in wholesale gas prices, which directly influence the regulatory price cap set by Ofgem.
The latest forecast from Cornwall Insight predicts that Ofgem's price cap for the period from July to September will surge to £1,827 per year for a typical dual fuel household. This represents a significant jump from the current cap of £1,641 annually.
However, the final price cap figure will be determined by average wholesale prices over a three-month assessment period. Consequently, the ultimate impact on consumers will depend critically on how long gas prices remain elevated and the duration of the current period of market volatility.
Historical Precedent Raises Concerns
Energy UK has warned that prolonged conflict in the Middle East increases the risk of energy bills reaching levels that would compel government intervention similar to the response following Russia's invasion of Ukraine in 2022.
During that previous crisis, the Government provided universal support to every bill payer regardless of their individual circumstances, at a total cost exceeding £35 billion. Energy UK estimates this support could have been delivered at a cost of just £12.5 billion if it had been targeted specifically at low and lower middle-income customers.
Calls for Targeted Support Mechanisms
The industry body asserts there remains time to "rapidly improve" targeting mechanisms if significant intervention becomes necessary later this year, particularly during the critical winter months when energy consumption peaks.
Energy UK is calling on the Government to immediately establish a "vaccine-style taskforce" that would bring together ministers, senior officials from relevant departments, and energy industry data experts. This proposed collaboration would form part of what the organisation describes as a "sprint to urgently assess options" for protecting vulnerable consumers.
Specific proposals include:
- Accelerating existing data-sharing programmes to identify customers already receiving welfare or disability payments
- Creating application processes for those who do not receive benefits but might still require support
- Lowering all electric bills by further reducing policy costs, which would particularly benefit users of electric storage heaters who are twice as likely to be in fuel poverty
Industry Leadership Emphasises Proactive Planning
Dhara Vyas, Chief Executive of Energy UK, emphasised the importance of preparedness despite uncertainty: "It is still too early to tell how significant an impact the conflict in the Middle East will have on British energy bills – but it is clearly sensible to prepare and ensure any intervention that might be necessary is both cost effective and directed to help those who most need it."
Vyas highlighted that successive governments have recognised the need for better-targeted support, but progress on the data-sharing that could enable this has been frustratingly slow. "As we saw during the pandemic and previous energy crisis, the state can move quickly and inject a sense of urgency into work when it is really required," she noted.
The Energy UK chief executive further stressed that proactive measures would benefit the country both during and outside crisis periods: "Energy bills remain higher than they were before the invasion of Ukraine, and there is growing concern about record amounts of customer debt. Prioritising efforts to identify these customers is crucial for any potential emergency response and will also mean that we can ensure they are supported in the long term."
The industry's call to action comes as households continue to grapple with energy costs that remain substantially elevated compared to pre-Ukraine invasion levels, with customer debt reaching record highs across the sector.
