The energy price cap could increase by more than £800 to “in the region of £2,800” in October, Ofgem’s boss has warned.
The regulator’s chief executive Jonathan Brearley made the stark prediction while appearing before the Business, Energy and Industrial Strategy Committee.
Here we take a look at what Mr Brearley said, what the current price cap is and why energy prices could continue to rise.
What did Ofgem’s chief say about the energy price cap?
Mr Brearley told MPs: “I am afraid to say conditions have worsened in the global gas market since Russia’s invasion of Ukraine. Gas prices are higher and highly volatile. At times, they have now reached over 10 times their normal level.
“I know this is a very distressing time for customers but I do need to be clear with this committee, with customers and with the Government about the likely price implications for October.
“Therefore, later today I will be writing to the Chancellor to give him our latest estimates of the price cap uplift.
“This is uncertain; we are only part way through the price cap window, but we are expecting a price cap in October in the region of £2,800.”
What is the current energy price cap?
The current energy price cap is £1,971 for those on default tariffs paying by direct debit for the average household.
The cap increased by 54% in April and Mr Brearley warned that energy prices could continue to rise even further if Russia further disrupts gas supplies.
Why are energy prices going up?
Ofgem’s chief executive said that the gas market’s continued volatility could lead to prices soaring again in October.
He said: “The price changes we have seen in the gas market are genuinely a once-in-a-generation event not seen since the oil crisis of the 1970s.
“In any conceivable circumstances, there would have been supplier failure.
“However, it is clear to me and it is clear to the current Ofgem board that, looking over all of our institution’s history, had financial controls been in place sooner we’d have likely seen fewer suppliers exit the market, and for that on behalf of Ofgem and its board I would like to apologise.”
Mr Brearley’s comments followed former Ofgem chief executive Dermot Nolan telling the committee that the regulator could have stopped some of the sector’s failures “if we had moved faster”.