Ofgem, the UK energy industry regulator, will make its latest announcement regarding the energy price cap on Friday 26 August, with experts forecasting another huge rise in the maximum amount utility companies can charge their customers on standard tariffs as global gas prices soar.
Having already jumped from £1,200 to £1,971 in April, Cornwall Insight analysts now warn the cap could increase to as much as £3,600 and again to £4,200 and then £5,300 in the new year, a situation that may prove untenable.
If current trends continue, millions of Britons could be driven into fuel poverty this winter, leaving them facing difficult choices as the cost of heating their homes becomes potentially prohibitively expensive.
“People are going to be on the streets,” Conservative MP Kevin Hollindrake warned on Monday. “Things are going to be that bad for some households.”
Ofgem previously amended its cap just twice a year but is now doing so quarterly in order to more precisely respond to the demands of the market.
The figure it announces on Friday will come into effect on 1 October.
The regulator will then make subsequent announcements for future quarters on 24 November, 27 February, 26 May and 25 August, with the new amounts then brought into play on 1 January, 1 April, 1 July and 1 October respectively.
The price of gas was already high in 2021 due to increased demand as the world cast off Covid-19 restrictions and emerged from lockdown.
Low renewable power generation after less-than-ideal weather conditions also drove up demand while overdue maintenance work, delayed by the pandemic, held up supply.
Russia’s invasion of Ukraine in late February has since caused the situation to worsen considerably, with Vladimir Putin’s regime seemingly prepared to punish the continent by reducing natural gas supplies this winter in revenge for the sanctions imposed on Moscow in opposition to its conflict.
Reluctance to do business with Mr Putin’s Russia has meanwhile forced countries to seek to reduce their exposure to its wares and look elsewhere for natural gas, further ratcheting up global demand and prices in a market already facing a tight squeeze.
To address this dire state of affairs and support low-income households, the UK government did announce a package of measures earlier this year, although it is becoming increasingly clear that more action will be needed imminently.
Former chancellor Rishi Sunak’s headline gesture this spring was knocking £400 off household energy bills, alongside a £650 one-off payment for around eight million households on means-tested benefits; a £300 one-off payment to over 8 million pensioner households to be paid alongside their winter fuel payment; and a £150 one-off payment for around 6 million people across the UK who receive certain disability benefits.
With inflation subsequently rising to a 40-year high of 10.1 per cent (and tipped to hit a “stratospheric” 18.6 per cent), consumer goods becoming ever-more expensive as wages drop 3 per cent in value and outgoing prime minister Boris Johnson washing his hands of the crisis, it will be up to either foreign secretary Liz Truss or Mr Sunak to hit the ground running once the interminable Tory leadership contest is finally concluded on 5 September.
So severe is the situation that Utilita CEO Bill Bullen called on the Tories on Monday to end the race early and pick a winner now so that planning could get underway as soon as possible for the sake of the economy and the country.
Labour leader Sir Keir Starmer has meanwhile enjoyed a bump in the polls after unveiling a plan to freeze the energy price cap but Ms Truss, Britain’s most likely new PM, has repeatedly expressed opposition to further “handouts” and insisted tax cuts are the only way to boost an economy sliding towards recession.
At least one protest group has already emerged calling on households to simply refuse to pay their bills without further support.
Public opposition to the spiralling cost of energy bills is likely to only become more vehement once the weather turns and radiators begin to be cranked up.
