Cornwall Insight has forecast that the energy price cap, which was set at a record £1,277 a year from 1 October, will be increased further in spring 2022 if the energy crisis continues.
“With wholesale gas and electricity prices continuing to reach new records, successive supplier exits during September 2021, and a new level for the default tariff cap, the British energy market remains on edge for fresh volatility and further consolidation,” said Craig Lowrey, senior consultant at Cornwall Insight.
What is the energy price cap
The energy price cap sets the maximum price that suppliers in England, Wales, and Scotland can charge customers on a standard – or default – tariff. That includes the fixed daily amount customers pay, plus the price per unit they pay for electricity and gas.
The increase in October has led to roughly 15 million households facing a 12% rise in energy bills, the biggest jump, and to the highest amount, seen since the backstop was introduced in January 2019.
Andrew Large, director general of the Confederation of Paper Industries, said: “This is a highly inflationary situation for the British economy and members will clearly be in a position where they do try to pass those costs on to consumers where they can.”
Nine suppliers have collapsed in recent weeks, after finding themselves unable to maintain price promises in the face of soaring wholesale gas prices. It is predicted that more could follow.
The cap is usually only reviewed twice a year. However, Ofgem has yet to rule out a higher frequency of adjustment. Jonathan Brearley, Ofgem chief executive, told trade body Energy UK’s industry conference: “Although the gas price rise is unprecedented today, we will need to plan on the basis that shocks like this could happen again.”