Energy bills are expected to increase by over £200 annually for the average household starting in July, according to a forthcoming update from Ofgem. Cornwall Insight predicts that the Ofgem energy price cap will jump to £1,850 this summer, marking a 13% rise from the current £1,641 yearly bill. This surge is primarily attributed to the conflict in Iran, which has driven up wholesale prices due to the closure of the Strait of Hormuz, a critical shipping route for approximately 20% of global oil and gas.
Cornwall Insight has cautioned that the real concern will arise in October when temperatures drop and energy usage typically rises. The organization foresees similar energy consumption levels in October as in July, posing further challenges for households. The duration of the Middle East conflict will significantly impact future price cap projections.
Dr. Craig Lowrey, a principal consultant at Cornwall Insight, emphasized the potential hardship for households with the summer price increase, highlighting the heightened demand in October. He suggested that if the price cap remains steady in July, the government may need to consider targeted assistance for the most vulnerable consumers.
Ofgem is set to announce the July price cap, which will be effective for three months, on May 27. The price cap does not restrict the total energy costs but establishes the maximum unit rates and standing charges. It represents the expected annual expenditure for a typical household with average energy usage paying via direct debit.
Consumers on standard variable rate tariffs are covered by the price cap. Richard Neudegg, director of regulation at Uswitch.com, recommended exploring fixed energy deals to potentially save money. Neudegg highlighted the importance of acting promptly to avoid the anticipated 13% increase in energy bills, as several fixed tariffs currently offer savings exceeding £200 for an average home.
To find a suitable fixed energy deal, consumers can utilize comparison websites by entering their postcode to access the latest tariff information. It is essential to compare the quoted costs against the current price cap rates and consider any exit fees.