Cost of living: Renewed bills warning as price cap could hit £5,000 in direst forecast to date
The cap on energy bills could exceed £5,000 next year, experts have warned, as pressure mounts on the government to urgently intervene to provide emergency relief for households bracing for a winter crisis.
Energy regulator Ofgem could be forced to set the cap at £5,038 per year for the average household in the three months beginning next April.
It is more than £200 higher than previous forecasts, which were already grim, and Auxilione, an energy consultancy, also predicted that bills would reach £4,467 in January.
This forecast is likely to worry energy users more than April’s higher number, as households use more gas during the winter months.
As it stands, the nightmare scenario would mean that an average household will spend £571 on energy in the month of January.
What is the price cap and how are energy price predictions calculated?
The price cap - the maximum amount suppliers can charge customers in England, Scotland and Wales for each unit of energy - on energy bills is calculated based on average household use. If you use less energy, then your bills will be lower.
The latest prediction is that the cost of gas will be capped at 18.02p per kilowatt hour and 70.34p per kWh of electricity.
The new prediction is based on today’s energy price on wholesale markets, with the final price calculated by tracking the wholesale price over several months.
The latest price cap is due to be announced at the end of August by Ofgem.
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Auxilione said there will be little the businesses can do, as gas prices are set internationally.
“Today the UK government has called energy companies in to try and find a way to bring down prices,” it said.
“It seems there is little appreciation just how impossible that task is and neither have control over this in such a globally-influenced market.”
The government announced a sweeping package of support for households in May when bills were expected to peak at £2,800 in the October price cap.
Now that cap is expected to be £3,634, Auxilione said. Campaigners and energy companies have said that more support is needed, especially for the most vulnerable customers in society.
How is the government responding to the energy crisis?
The latest dire energy bill prediction comes as ministers are set to hold talks with energy giants on Thursday to discuss measures to ease the spiralling cost-of-living.
Chancellor Nadhim Zahawi and Business Secretary Kwasi Kwarteng will press gas and electricity company executives for solutions to the predicted spike in bills over winter.
Executives are being asked to submit a breakdown of expected profits and payouts, as well as investment plans for the next three years.
But officials have stressed that any decisions on major fiscal issues will be decided after the new prime minister takes office in September.
Money Saving Expert Martin Lewis has condemned the government for acting like “zombies” over the crisis, warning that the "cataclysmic" rise in bills is similar in scale to the Covid pandemic.
He criticised proposals from Foreign Secretary Liz Truss, the frontrunner in the Tory leadership race, which focused on tax cuts as a way of helping the poorest households.
In February, the then chancellor, Rishi Sunak, now vying to be the next PM, announced that eligible UK households would receive a £400 discount to help with energy bills from October.
Martin Lewis said ministers will need to at least double this amount of support, as wholesale prices have since threatened to wipe out the impact of that support.
Experts say that by turning down the so-called flow temperature on your boiler and turning off the preheat function you can save hundreds of pounds at this winter’s prices.