Millions of households are set to face the highest energy bills the UK has ever seen.
Energy regulator Ofgem confirmed an 80% jump in prices which will send the average household’s yearly bill from £1,971 to £3,549. It equates to a direct debit of almost £300 a month.
This means that from 1 October 2022, many households will be forced to cut back on their spending as the country is plunged even deeper into a cost of living crisis.
Ofgem has revealed that price cap announcements will now take place every three months, with the current October cap being in place until 31 December 2022.
It is feared the recent increase in energy prices could cause further financial misery in 2023. But what is to blame for the soaring prices of gas and electricity in the UK?
Why are energy prices rising in the UK?
During the Covid-19 pandemic, there was an increased demand for energy which caused wholesale prices of gas in Europe to rise by around 300%. As a result of this the prices of electricity also increased.
As a result of the financial strain caused by Covid-19, around 30 energy providers in the UK fell into liquidation.
It caused an increase in demand for the remaining providers.
Is the Russia-Ukraine war affecting energy prices in the UK?
Even before the Ukraine crisis escalated, average UK prices were expected to rise to around £2,200 per year.
However, the Russian invasion of Ukraine has further compounded the problem.
Russia is a huge supplier of gas, which the UK also use for electricity and the ongoing conflict has led to a major increase in the price of wholesale gas prices.
Money saving expert Martin Lewis has claimed the economic uncertainty Ukraine has faced has been replicated around the world, which has brought down productivity and caused a “substantial economic impact.”
Will energy prices go down in 2023/24?
Many families in the UK will be hoping the energy prices drop in 2023, however, they will be disappointed to hear that analysts are predicting a further increase in the prices of energy next year.
Some experts have warned that the cap could double by April next year, with Auxilione Energy estimating bills to reach a staggering £7,263.
Cornwall Insight has predicted there will be a further 30% rise in energy bills in January 2023. If these predictions are true then the average annual bill could rise up to £4,649 for the year in the UK.
Further forecasts by Cornwall Insight suggest this trend will continue in April 2023 with prices rising to around £5,341.
The forecast for July 2023 is slightly more optimistic from Cornwall Insight and they are predicting that bills will fall by around £800 in comparison to the April predictions.
Overall energy prices are likely to remain at over two times their pre crisis levels until at the very least the beginning of 2024 according to the recent forecasts.
Cornwall Insights principal consultant Craig Lowery did warn movement in the wholesale market could swing the numbers either way.
He said: “The highly volatile nature of the market means these figures are potentially subject to significant change – both up and down – over the next few months.”
What has the UK government done to help?
The government is coming under increasing pressure to act to help families who are suffering from the rising energy bills. More help is likely to be revealed in an emergency budget in September 2022.
Earlier this year the government introduced the energy bills support scheme which offers a £400 non-repayable discount to eligible households from October. The scheme is expected to support around 29 million households across Great Britain.
Lowery said: “There are several avenues that can be explored including a review and expansion of the current support package of at least £400 per household. However, all of these are temporary solutions and must be accompanied by a focus on implementing a viable long-term solution.”
There is no need to apply for the energy bills support scheme and energy suppliers will deliver this support to households over 6 months starting in October. More information on this scheme is available on the government website.