The energy price cap, which limits how much energy providers can increase their prices by, is set to rise by a further £800 in October, Ofgem has confirmed.
Ofgem’s chief executive, Jonathan Brearley, said the cap is expected to increase to £2,800 a year, due to continued volatility in gas prices.
This means that the typical household energy bill is set to rise by about £800 a year from October.
Mr Brearley said the price rises were a “once in a generation event not seen since the oil crisis in the 1970s”.
He added that the number of people in fuel poverty could double to 12 million.
The price cap previously increased by 53%, or £693, to £1,971 in April.
Speaking to the Business, Energy and Industrial Strategy Committee this week, Brearley said: “We are expecting a price cap in the region of £2,800.”
He said the price cap could rise further if Russia decided to further disrupt supplies.
Brearley added: “We are really managing between two versions of events. One where the price falls back down to where it was before, for example if there’s peace in Ukraine, but one where prices could go even further if we were to see, for example, a disruptive interruption of gas from Russia.”
Discussing the energy price cap rise, Justina Miltienyte, head of policy at Uswitch.com, commented: “This admission from Ofgem confirms the worst fears of everyone who is currently struggling to pay their energy bill. Although we have long expected the price cap will rise again in October, this is the first time the regulator has estimated how high it could soar.
“The final figure is still uncertain as we have a few months left before the announcement, so it could go further up or down, depending on the market volatility.
“Nearly a quarter of consumers are already in debt to their supplier and are facing financial pressures from all sides. Now is the time for the government to act and put together a comprehensive package of help for the most vulnerable before it is too late.”
How is the war in Ukraine affecting energy prices?
Russia is the world’s second-biggest producer and largest exporter of natural gas, and the third-largest individual producer of oil.
Russian imports account for just 8% of total UK oil demand, but up to 40% of Europe’s. However, the UK energy market is closely connected to markets in mainland Europe meaning any disruption is likely to have a knock-on effect on the wholesale cost for British consumers, including businesses.
The Institute for Fiscal Studies (IFS) recently warned that rises in energy prices since the Russian invasion of Ukraine could increase the hit to households to around £43 billion.
What can businesses do to save money on their energy bills?
Our previous blog outlined a series of support schemes on offer for small businesses struggling to save their energy bills, as well as tips to reduce energy outgoings.
A range of business finance schemes and grants, as well as government and regional schemes, are available to help SMEs combat rising energy prices.
In addition, your commercial energy provider may be able to offer a business grant to help you improve your business energy efficiency. These could include subsidies on the upfront costs for more energy-efficient equipment.
Having a smart meter installed can save businesses around 10% on their annual fuel bills and improving the efficiency of heating systems, insulation, and even switching to energy-saving lightbulbs can make a big difference.
Optimise your business energy consumption with Enexus
Enexus Energy provides businesses with bespoke strategies to optimise the purchase and use of commercial energy.
We can help firms take proactive measures to lower their business energy outgoings, reduce consumption, and guide you to lasting savings on your energy costs.
To see how we can help, please get in touch:
Tel: 01253 966 960