Yahoo Finance UK energy price cap expected to rise to £2,800 in October, says Ofgem boss
UK households face even higher bills as the boss of the UK's energy regulator has warned that the energy price cap is expected to rise to around £2,800 in October.
"Now, this is uncertain, we are only halfway through our price cap window but we are expecting a price cap in October in the region of £2800," Jonathan Brearley, CEO of Ofgem, told the Business, Energy and Industrial Strategy committee.
Read more: How to save hundreds of pounds on your energy bill
"I know this is a very distressing time for costumers but I do need to be clear with this committee, with customers and with the government about the likely price implications for October," he added.
Energy bills rose £693 to £1,971 in April after the regulator announced a 54% energy price cap increase amid soaring oil and gas prices, meaning that prices will have more than doubled in just over six months.
The cap covers consumers on standard variable energy tariffs, rather than fixed tariffs, equating to around 22 million households.
The Ofgem boss said: "I'm afraid to say conditions have worsened in the global gas market, with Russia's invasion of Ukraine.
Read more: How to cope with bills out of the blue when you really can’t afford it
"Gas prices are higher and highly volatile. At times they have now reached over 10 times their normal level."
He added: "Our future scenarios when we look beyond that, we're really managing between two extreme versions of events — one where the price falls back down to where it was before, for example if we did see peace in Ukraine, and one where prices could go even further if we were to see, for example, a disruptive interruption of gas from Russia."
Almost 10 million households could find themselves in “fuel stress” this winter if the price cap rises to around £2,800, an economic think tank said.
The Resolution Foundation analysis suggested the number of families living in fuel stress — defined as spending at least a tenth of their total budgets on energy bills alone — would rise from 5 million to 9.6 million.
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 10 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.”
Business secretary Kwasi Kwarteng said bill payers had to “wait and see” what extra help would be on offer to cope with rising energy costs.
“Both the prime minister and the chancellor have said that there will be further announcements in respect of giving assistance to people,” he told MPs.
Faced with the prospect of the price cap rising to £2,800, Kwarteng was pressed on what more could be offered.
“What we see now isn’t the full picture. Both the prime minister and the chancellor have said there is more to do and we have to just wait and see what is forthcoming.”
He added: “It’s a difficult time, we all know that people are under huge stress. We also know that the cost of living is a very real issue and nobody is suggesting that the government can pay the entirety of the energy bill.
“What we are committed to is giving support and that’s what we are doing.”
Former Ofgem chief executive Dermot Nolan previously told MPs 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, told the Business, Energy and Industrial Strategy Committee that “body politic” wanted Ofgem to prioritise competition over regulatory supervision following 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 that was probably not reasonable, not fair and we needed to do something about it”.
Nolan said: “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.”
