Household energy bills are likely to rise again in October despite a predicted 50 per cent jump in the consumer price cap this spring, warns Emma Pinchbeck, chief executive of Energy UK.
The leader of the country’s trade body for energy suppliers, said successive hikes in the consumer price cap were very plausible “if nothing changes,” with annual household bills potentially reaching £2,400 per by the end of the year.
Speaking at a media webinar on the energy crisis, she said: “We haven’t seen anything like this, not in my career or in any of the people who sit on my board.”
Household costs are set to increase to reflect the market reality of soaring wholesale gas prices, which increased five-fold over the duration of last year.
Ofgem will meet on February 7 to discuss hiking the consumer price cap in April, which currently limits household bills to £1,277 per year for average use.
Analysts and industry commentators anticipate a potential £700 increase, with annual fees potentially reaching £2,000.
While this is painful news for households, it reflects the gravity of the situation for suppliers with dozens collapsing since last September – directly affecting over four million customers.
When Bulb Energy entered special administration, it revealed that the price cap contained costs for consumers to 70p per therm, despite it costing the company £4 per therm to buy supplies.
Pinchbeck said that although wholesale prices were expected to drop, “they are still three times higher than we expect to see at this time of the year,” gloomily described the situation as “enduring”.
The government is reportedly considering multiple measures to mitigate rising prices for consumers including expanding the Warm Home Discount scheme, cutting VAT and potentially creating a new scheme where Downing Street lends public money to suppliers to smooth over market shocks.
However, free market think tanks such as the Institute of Economic Affairs and the Adam Smith Institute have both cautioned the government against further meddling in the market, blaming industry carnage on the consumer price cap.
Industry leaders such as Keith Anderson, chief executive at Scottish Power, and Bill Bullen, founder of Utilita Energy, have also called for the mechanism to be reformed.