The energy analysts predict that the price cap for standard and standard tariffs will rise to around £ 1,250 per year in October for a typical dual-fuel household paid by direct debit, up from the current price of £ 1,138 per year. These tariffs tend to be the most expensive – and if you haven’t switched in the last year, chances are you’ll switch to a tariff (check out the Cheap Energy Club to see how much you save by switching could).
For the average household, the increase means bills would increase by £ 112 / year as many providers set their standard rates within just a few pounds of the price cap.
According to Cornwall Insight, the expected increase is due to rising wholesale energy costs (what suppliers pay for gas and electricity). Prices have risen rapidly in recent months and have reached their highest level since 2018, when the extreme weather conditions caused by the “Beast from the East” caused prices to skyrocket.
Ofgem has not yet officially announced how the price cap will change the next time the cap is reviewed. This is expected to be the case in August, with the changes going into effect from October 1st – especially when we are entering the winter season with intensive use.
Savings results will be underrated if you compare it – but don’t let that put you off to beat the hikes
Based on Cornwall Insight’s forecast, the next price cap could be more than £ 400 / year above what is currently the cheapest rate on the market – so check out now how much you could save by switching.
Since we don’t yet know exactly how prices will change in October, the savings you see comparing them are likely to be massively underestimated when compared to them today Prices based on the current cap. So they don’t include the likely £ 100 + / year saved by avoiding the price cap.
If you’re on one of these limited plans, you may not be charged exit fees, so you can switch anytime, so don’t wait.
If you find choosing a new energy tariff confusing, try our free Pick Me A Tariff tools to find the cheapest deal based on your preferences. Or you can do your own full market comparison through our Cheap Energy Club.
Why are rising prices forecast?
Cornwall Insight has forecast a sharp rise in the cap this year due to massive spikes in wholesale prices.
This is due to a sharp rise in costs in connection with a Europe-wide program to reduce CO2 emissions and to higher gas prices due to a very cold winter across Europe.
Electricity prices have also risen due to unforeseen and prolonged failures of many fossil and nuclear power plants.
How does the price cap work?
The price cap limits the maximum amount that providers can charge for each unit of gas and electricity you use, and sets a maximum daily base fee (what you pay to connect your home to the grid).
Currently, someone who uses a typical amount of energy at a standard or standard rate pays a maximum of £ 1,138 a year on average, but Cornwall Insight predicts this will climb to around £ 1,250 per year from October 1st.
The price cap is reviewed twice a year, with changes coming into effect in April and October. It is slated to stay in place until at least the end of this year, with Ofgem later this year will recommend continuing it until 2023.
What does Cornwall Insight say?
Dr. Craig Lowrey, Senior Consultant at Cornwall Insight, said: “The latest forecasts from Cornwall Insight suggest that the price cap on the standard rate will increase by more than £ 100 for the winter of 2021-22 to around £ 1,250 per year for a typical Dual will – fuel direct debit customers – from currently £ 1,138 / year.
“Cornwall Insight’s modeling suggests that it is now likely that we will see a significant spike in the winter price cap. The UK has seen a significant spike in wholesale energy costs, among the highest since the Beast from the East in 2018 . ” .
“While there are still a number of uncertainties about possible legislative changes and the ongoing effects of the coronavirus that will affect our forecast – and which will be addressed in the coming weeks and months – the sharp surge in the wholesale market is likely to be the primary driver for the expected increase in the upper price limit. “