Energy bills are expected to increase by over £200 per year for the average household starting in July, according to a forthcoming update from Ofgem. Cornwall Insight projects that the Ofgem energy price cap will climb to £1,850 this summer, a 13% jump from the current annual bill of £1,641.
The rise in prices is primarily attributed to the conflict in Iran, which has led to higher wholesale prices following the closure of the Strait of Hormuz, a vital shipping route for about 20% of global oil and gas. Cornwall Insight has cautioned that the real concern will arise in October as temperatures drop and energy usage typically rises to levels similar to those in July.
Dr. Craig Lowrey, a principal consultant at Cornwall Insight, emphasized that while the summer increase will be challenging for households, the major worry lies in October when energy demand typically surges. He suggested that if the price cap remains stable at the July level, the government may need to consider targeted support for the most vulnerable consumers.
The announcement of the July price cap, which will be effective for three months, is scheduled for May 27 by Ofgem. The price cap does not restrict the total amount consumers pay for energy but sets the maximum unit rates and standing charges. It represents the expected annual cost for a household with average energy usage that pays via direct debit.
Consumers on a standard variable rate tariff will benefit from the price cap. Richard Neudegg, the director of regulation at Uswitch.com, advised consumers to explore fixed energy deals to potentially save money amidst the anticipated rise in energy bills. He highlighted that several fixed tariffs currently offer savings compared to the predicted price cap, with some even exceeding £200 for an average household.
To discover fixed energy deals, individuals can utilize comparison sites by entering their postcode to access the latest tariffs. It is recommended to compare the quoted costs with the current price cap rate and consider any associated exit fees for a comprehensive assessment of potential savings.