Ofgem energy price cap for start of new year due to be announced this week
Ofgem is set to announce the new energy price cap on Friday and the latest forecast from Cornwall Insight is that it will only go up by £19 for the next 12 months, less than 40 pence per week (£1.58 per month). The energy consultancy said it expects the price cap to increase from the current £1,717 to £1,736, a rise of one per cent.
Cornwall Insight had previously predicted a slight drop, but said this was now no longer the case, coming as a blow after energy bills increased by 10 per cent at the start of October. They said: “Given the price cap rise in October, many will have been hoping to see a fall in the cap for January. Unfortunately, forecasts show that prices will be staying relatively high for the remainder of winter.”
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However, prices are still expected to fall slightly in both the second and fourth quarters of next year, according to Cornwall Insight. Ofgem changes the price cap for households every three months, largely based on the cost of energy on wholesale markets, with the regulator confirming the level for the first quarter of next year on November 22.
The energy price cap was introduced by the UK Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in Scotland, England and Wales for each kilowatt hour (kWh) of energy they use.
It does not limit total bills, because householders still pay for the amount of energy they consume. Essentially, this means the more energy you use, the more you pay for and the less you use, the less you pay for.
While the cap is significantly lower than at the peak of the energy crisis, which was fuelled by Russia’s invasion of Ukraine in February 2022, prices are still “very sensitive to global events” and supply concerns tied to geopolitical tensions, Cornwall Insight said.
Craig Lowrey, principal consultant at Cornwall Insight, said: “Supply concerns have kept the market as volatile as earlier in the year and additional charges have remained relatively stable, so prices have stayed flat.
“While we may have seen this coming, the news that prices will not drop from the rises in the autumn will still be disappointing to many as we move into the colder months.”
He called for the UK Government to help protect the vulnerable and tackle energy supply for the long-term.
In July, Chancellor Rachel Reeves announced that Winter Fuel Payments would no longer be issued to all 12.7 million pensioners across the UK. Instead, the annual payment will only be provided to those on means-tested benefits such as Pension Credit.
The rule change will see around 10m pensioners miss out on up to £300 heating bill help this winter, including around 850,000 in Scotland.
Mr Lowry said: “With it being widely accepted that high prices are here to stay, we need to see action. Options like social tariffs, adjustments to price caps, benefit restructuring or other targeted support for vulnerable households must be seriously considered.
“The Government needs to keep momentum on the transition while acknowledging that immediate support is essential for those struggling now. Inaction is a choice to leave people in the cold.”
Ofgem is also currently considering the future of price protection, including the suitability of the price cap and a potential permanent ban on so-called acquisition tariffs - cheaper prices for new customers to lure them away from their existing supplier.
National Energy Action director of policy and advocacy Peter Smith said: “The current cold spell is already having a devastating impact on the most vulnerable people.
“With unaffordable energy bills and far less support available nationally this winter, millions of people are already rationing their energy use to dangerous levels or getting deeper into debt trying to keep warm.
“With increased wholesale prices in the last few months, it is no surprise that there will be no let-up in the unaffordable cost of energy. The most vulnerable people will sink into further difficulties and acute hardship.”
Emily Seymour, Which? Energy Editor, said: "With the temperature dropping, many households will understandably be worried to hear the energy price cap is predicted to slightly increase in January. It's worth shopping around for energy deals - look out for any that might be cheaper than the January price cap when it comes into effect. Unfortunately, there's no 'one size fits all' approach when it comes to fixing an energy deal - it will all depend on your individual circumstances. You should compare what your monthly payments would be on a fixed deal with what you'd expect them to be if you remain with the price-capped variable tariff to see what the best option is for you.
"As a rule of thumb, we'd recommend looking for deals cheaper than the price cap, not longer than 12 months and without significant exit fees. Consumers can use switching services, like Which? Switch Energy, to keep an eye on the best fixed deals available and compare deals to see what’s cheapest for them.
"As winter approaches, this is the ideal time to review how you could take action to cut your bills. People can use Which?'s new home energy planning service to find out how they can heat their home more efficiently."
