THE energy price cap in the UK is expected to balloon to around £2800 in October, the industry regulator has warned.
Ofgem said the changes were a "once in a generation event" not seen since the 1970s oil crisis.
The current energy price cap is £1971.
Ofgem chief executive Jonathan Brearley told the Business, Energy and Industrial Strategy Committee that the increase is due to volatility within the gas market.
He warned future scenarios could include energy prices going even further up if Russia further disrupted gas supplies.
Brearley said: “I am afraid to say conditions have worsened in the global gas market since Russia’s invasion of Ukraine. Gas prices are higher and highly volatile. At times, they have now reached over 10 times their normal level.
“I know this is a very distressing time for customers but I do need to be clear with this committee, with customers and with the Government about the likely price implications for October.
“Therefore, later today I will be writing to the Chancellor to give him our latest estimates of the price cap uplift.
“This is uncertain; we are only part way through the price cap window, but we are expecting a price cap in October in the region of £2800.”
Ofgem’s prediction is a huge leap on April’s price cap increase of 54%, or an increase of £693 a year to £1971 for those on default tariffs paying by direct debit for the average household.
Brearley said: “The price changes we have seen in the gas market are genuinely a once-in-a-generation event not seen since the oil crisis of the 1970s.
“In any conceivable circumstances, there would have been supplier failure.
“However, it is clear to me and it is clear to the current Ofgem board that, looking over all of our institution’s history, had financial controls been in place sooner we’d have likely seen fewer suppliers exit the market, and for that on behalf of Ofgem and its board I would like to apologise.”
Brearley’s comments followed former Ofgem chief executive Dermot Nolan telling the committee that the regulator could have stopped some of the sector’s failures “if we had moved faster”.
Nolan, who headed up the regulator between 2014 and 2020, said the “body politic” wanted Ofgem to prioritise competition over regulatory supervision because of the “Big Six” firms’ enduring share – 98% to 99% – of the market.
Nolan said from around 2015 “many” new firms entered the market under a “permissive” regime “encouraged by government but also a conscious decision of the Ofgem board”.
However, it became apparent from 2017/18 that “in certain cases firms had entered the market in a speculative manner that was probably not reasonable, not fair and we needed to do something about it”.
Nolan added: “I don’t think any regime would have been entirely fit for purpose, but I do accept that if we have moved faster we would have stopped some of the failures that have happened.”
The former regulator chief said Citizens Advice had expressed concerns that a lot of new entrants were not supplying adequate quality of service to consumers but he did not recall the consumer watchdog warning that the market was unstable.
Asked to confirm Ofgem’s position, Nolan replied: “Many of the risks were accepted by the Ofgem board. I was part of the Ofgem board.”
Committee chairman Darren Jones asked Nolan: “It’s now cost taxpayers billions of pounds. Do you wish to apologise to the public, Mr Nolan?”
Nolan replied: “I regret that during my time at Ofgem we did not take actions more quickly that I think would have protected consumers, yes.”
Jones then asked: “It was your failing, wasn’t it, Mr Nolan?”
Nolan responded: “I don’t think I would concur with that.”
Jonny Marshall, Senior Economist at the Resolution Foundation, said: “UK households are set for another huge jump in the energy bills this October – just when the need to heat their homes grows – which could push up to ten million families into fuel stress.
“The sheer scale and depth of Britain’s cost-of-living crisis means the Government must urgently provide significant additional support.
“The fact that the crisis is so heavily concentrated on low-and-middle incomes households means it’s clear how the Government should target policy support. The benefits system is clearly the best route to support those worst affected in the short term – be that via an early uprating or lump sum payments to help poorer households get through the difficult winter ahead.
“Looking beyond this winter, these households will also benefit most from cheaper renewable energy and lower consumption from better insulated homes – showing why Britain needs to massively step up its retrofitting programme.”
