Energy price cap forecast: new Cornwall Insight Ofgem prediction suggests hike in UK prices for winter 2024

• Average household energy bills are projected to rise by nine per cent in October

• This increase is slightly lower than the 9.9 per cent rise previously predicted in June

• A ‘modest’ rise in energy bills is also anticipated in January 2025

• The energy price cap, set by Ofgem, is reviewed every three months to reflect market changes

• The rise in the cap may strain finances for households, especially during the winter months

• Experts suggest the need for reforming the price cap or introducing social tariffs to better support low-income households

Experts are predicting that the average household energy bill could increase substantially in October.

According to energy consultancy Cornwall Insight, the typical annual energy cost is expected to rise by nine per cent with the introduction of the new price cap adjustment.

The anticipated rise - to £1,714 from the current £1,568 - is a slight reduction from their previous June forecast, which projected a 9.9 per cent increase to £1,723.

Cornwall Insight also anticipates a potential “modest” rise in January 2025, with the possibility of additional increases early in the year due to ongoing tensions in the Russia-Ukraine conflict.

What is the energy price cap?

Energy regulator Ofgem will announce the energy price cap for October to December on Friday.

The energy price cap was introduced by the Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.

The cap is designed to protect consumers from excessively high energy prices, and is typically reviewed and adjusted every three months to reflect changes in the wholesale energy market.

Prices for energy can rise or fall based on supply and demand, and if suppliers face higher costs, the cap may be adjusted to allow them to cover these costs while still keeping prices reasonable for consumers.

The regular adjustments help ensure that the cap remains in line with current market conditions and costs, providing a balance between fair pricing for consumers and sustainability for energy suppliers.

The price cap does not limit a household’s total bills because people still pay for each unit of gas and electricity they use.

The figures provided are calculated for an average-use household and if more energy than average is used, a household will pay above the cap.

What could the expected price cap rise mean?

The expected rise in the energy price cap ahead of the colder winter months could have significant implications for energy customers, particularly vulnerable and financially struggling individuals.

With the price cap set to rise, households will face higher energy bills, which could be substantial during winter when energy consumption typically rises due to heating needs.

For many households, especially those on fixed incomes or with tight budgets, the higher bills may strain finances and lead to difficult choices between heating and other essential expenses.

Craig Lowrey, principal consultant at Cornwall Insight, said: “This is not the news households want to hear when moving into the colder months.

“Following two consecutive falls in the cap, I’m sure many hoped we were on a steady path back to pre-crisis prices.

“However, the lingering impact of the energy crisis has left us with a market that’s still highly volatile and quick to react to any bad news on the supply front.

“Despite this, while we don’t expect a return to the extreme prices of recent years, it’s unlikely that bills will return to what was once considered normal. Without significant intervention, this may well be the new normal.”

Cornwall Insight is calling for a reform of the price cap or introduction of social tariffs - special pricing plans designed to assist vulnerable or low-income households with their energy costs.

Social tariffs are available today, though their availability and specifics can vary by region and energy supplier. To find out about available options and apply with your energy supplier, contact them directly.

Suppliers often have dedicated services or teams to assist with this process. Some government programs, such as the Warm Home Discount Scheme, also offer financial assistance that may complement social tariffs.

With energy bills set to rise, we want to hear from you! How will the expected increase impact your household? Do you have suggestions for how to manage rising costs? Share your experiences in the comments section.