Energy bills are set to increase by £288 in July due to the ongoing conflict in the Middle East, a warning issued to households indicates. Cornwall Insight, an industry expert, has raised its latest projection for Ofgem’s price cap by 18% to £1,929 annually. This surge is attributed to the soaring wholesale energy costs driven by tensions between the US, Israel, and Iran. Updates to Cornwall Insight’s forecasts have been frequent given the potential impact on bills.
Ofgem’s price cap governs the unit rate paid by millions of households on standard variable tariffs, with the total bill dependent on individual energy consumption. While the cap was initially expected to decrease by 7% to an average of £1,641 annually, recent developments in the Middle East and a doubling of wholesale gas prices suggest a likely increase in July.
The prospect of additional financial strain on households has intensified calls for targeted government assistance. Cornwall Insight’s revised forecast of £1,929 annually is slightly lower than the previous estimate of £1,973, reflecting some stability in wholesale markets following a lull in attacks on energy infrastructure and hopes for a ceasefire.
Dr. Craig Lowrey, Principal Consultant at Cornwall Insight, noted the unprecedented market volatility amid the Middle East conflict, with prices expected to rise by 18%. He emphasized that while some price increase is inevitable, the extent remains uncertain. The timing of the price hike in July, coinciding with lower energy demand in summer, may help mitigate its impact on household expenses. However, prolonged high wholesale prices could significantly impact the October cap, prompting a reassessment of government support for households.
Ofgem adjusts its price cap quarterly based on wholesale energy costs and additional charges. Although the average cap for a typical dual fuel customer is projected to decrease to £1,641 annually, fluctuations are anticipated over the next year, particularly influenced by wholesale energy price movements.
Martin McCluskey, Minister for Energy Consumers, highlighted the government’s efforts to reduce energy bills, with the price cap expected to decrease from tomorrow. He assured that measures are in place to protect households from rising costs, especially in light of the ongoing events in the Middle East. The government remains committed to addressing affordability concerns and is prepared to intervene if necessary.