Energy price cap: annual bills forecast to hit £3,615 this winter as cost of living crisis deepens

Rising gas prices and concerns about Russian supply have been blamed for the increase

Households across Britain could face an annual energy bill in excess of £3,600 this winter, experts have warned.

Energy consultant Cornwall Insight has forecast regular gas and electricity bills in England, Wales and Scotland to hit £3,615 in the new year - hundred of pounds more than previous predictions.

The company told BBC Breakfast that annual bills are likely to reach £3,358 from October, before rising again in January to £3,615.

It comes just a month after Cornwall Insight predicted the energy price cap to rise to £3,244 from October and £3,633 from January, but the company said circumstances have changed significantly since then.

Charity National Energy Action last month predicted that, should the average bill reach £3,250 per year, 8.2 million UK households will be in fuel poverty, or one in three.

Households across Britain could face an annual energy bill in excess of £3,600 this winter (Photo: Adobe)

Why are energy bills forecast to rise?

Surging gas prices and concerns about Russian supply has prompted the sharp increase in energy bill price forecasts, according to the company.

Craig Lowrey, Cornwall Insight’s principal consultant, told BBC Breakfast: “While the rise in forecasts for October and January is a pressing concern, it is not only the level – but the duration – of the rises that makes these new forecasts so devastating.

“Given the current level of the wholesale price, this level of household energy bills currently shows little sign of abating into 2024.”

In May, the government announced an emergency support package to help households cope with rising energy costs.

Some 29 million households will receive a £400 energy bill payment from October, with the discount to be made in six instalments throughout the winter period.

The government unveiled the package of support measures in response to the predictions that bills would rise to £2,800 for the average household in October - but latest estimates are now significantly higher.

Dr Lowrey joined other experts in saying that funding from the government will “only scratch the surface” for households.

He added: “While the government has pledged some support for October’s energy rise, our cap forecast has increased by over £500 since the funding was proposed, and the truth is the £400 pledged will only scratch the surface of this problem.”

On Friday, Richard Neudegg, director of regulation at Uswitch, called for the £400 to be increased to at least £600, and for payments to vulnerable households to rise from £650 to £950.

He said: “The government did the right thing by stepping in with wide-reaching support to try to help ease the blow. However, this support now looks like a severe under-estimation of what consumers need.

“Households need clarity to help them plan for the most expensive winter in living memory.”

What is the energy price cap?

The energy price cap limits the rates a supplier can charge for its default tariffs, including the standing charge and price for each kWh of electricity and gas.

Ofgem determines its energy price cap by calculating how much it would cost a typical energy supplier to supply an average home.

It does this by analysing several factors that impact energy bills, such as wholesale gas and electricity costs, as well as usage and market data over a review period.

Since its introduction in 2019, the cap has changed twice a year - once in April to cover the summer months when energy needs tend to be lower, and again in October for the more energy intensive winter months.

Ofgem announced last month that it is now considering changing the cap every three months as it says this would help both consumers and suppliers.

The price cap is already worse for customers than it has ever been, with the average household seeing energy costs increase from £1,277 to £1,971 in April. Previously, the price had been as low as £1,042 in the summer of 2020 - the cheapest since the policy first came into force in 2019.