Households are facing soaring costs as the energy price cap increased again in October 2022.
The average price of electricity per unit has gone up from 28p per kWH to 52p per kWH, with a 1p increase to the standing charge (46p). While what we pay for gas has more than doubled on average from 7p per kWH to 15 per kWH, with the standard charge rising to 28p a day.
Some experts are warning that typical gas and electricity bills could rise beyond £7,000 a year in 2023, as the UK government considers a variety of support packages to help households meet payments. Tips on how to save energy at home are also being circulated online.
Here's why energy bills are skyrocketing and why they are forecast to increase even more later this year.
Why are energy bills going up?
A dramatic increase in the cost of wholesale gas has put pressure on the energy industry and exposed the cracks.
Wholesale gas prices increased by 250% in 2021, as the energy crisis gripped firms.
Factors for the prices going up include supply and demand following a particularly cold winter across Europe, pressure on supplies, and Russia’s invasion of Ukraine.
What has been the impact of increasing energy bills?
More than 20 energy firms have gone bust already as smaller companies have struggled to cope with the sustained rise in wholesale gas costs.
Companies shouldered the initial financial weight before an increase to the energy price cap alleviated some of that burden in October 2021.
However, it came too late for some smaller firms, such as Pure Planet and Avro Energy, who could not recoup costs fast enough to plug the holes.
Ministers and Ofgem worked together with struggling suppliers, with many entering the independent regulator's Supplier of Last Resort process.
And, while no-one has been without energy under the process, consumers are being switched over to significantly increased rates or tariffs.
Will energy bills rise in 2023?
Experts at energy consultancy Auxilione warned that the cap could double even from that record high by April next year, hitting £7,263.
The prediction is based on the current cost of buying energy on global markets and also sees bills hitting £5,405 in January.
Fellow consultants at Cornwall Insight are a little more optimistic. Their model expects the cap to only reach £5,387 in January and then £6,616 from April.
Both consultancies then expect bills to fall by between £700 to £800 in July when compared to the April cap.
It is the grimmest forecast yet from the two outfits, whose predictions for October’s price cap were close to Ofgem’s decision.
Auxilione’s final forecast was just £27 above what the cap was set at, while Cornwall Insight’s prediction was £5 above.
The predictions are largely based on what gas prices are doing at the moment, so are subject to a lot of change between now and January, let alone before April.
“While there is still some time until the January and April caps are set, the energy crisis is showing no sign of abating,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.
“A key focus for the next Prime Minister and for Ofgem must be protecting consumers, and the wider economy from the impact of this rise,” he added.