UK households are set to be hit by energy prices as high as £500 a month in the new year, according to new analysis, leaving the economy and consumer spending reeling.
Energy specialist Cornwall Insight told City A.M. yesterday it expected the consumer price cap would hit £3,500 per year as soon as this October.
Fellow forecasters BFY Group said that would climb again to £3,850 in January, the coldest month of the year, which with average demand patterns would leave households handing over £500 that month.
The new forecasts have been triggered by the Kremlin-backed gas giant Gazprom halving already-diminished gas flows to Europe on the key Nord Stream 1 pipeline from 40 to 20 per cent of capaicty.
Russia’s decision to cut gas flows into Europe has raised the prospect of a chilling winter of blackouts and disruption across the continent, with the EU scrambling to shore up suppliers and lure alternate energy vendors.
It has finalised an agreement for 15 per cent voluntary gas cuts across the bloc over the winter, and has urged member states to boost supplies to at least 80 per cent of storage capacity by September.
Storage levels are currently at 67 per cent with the International Energy Agency warning earlier this month supplies had to be at 90 per cent to prevent shortages if Russia turns off the taps entirely.
Anxiety over supplies has been reflected in natural gas prices, which have climbed to an all-time high on the Dutch TTF Futures benchmark of €220 per megawatt hour – even higher than the previous peak when Vladimir Putin (left) ordered a Russian invasion of Ukraine in February.
UK prices also spiked six per cent to £3.73 per therm – with domestic markets highly influenced by global volatility.
The benchmark was trading at 58p this time last year.
Though the UK is not reliant on Russian energy supplies in the same way as much of the continent, the body tasked with ensuring the country’s energy supply wanred yesterday that there would be “some tight periods this winter.”
The Electricity System Operator warned yesterday that “operational modelling” suggested it would need to send out Electricity Margin Notices, effectively a call for extra energy into the grid.
“It is clear that the cessation of flows of gas into Europe could have knock-on impacts, including very high prices,” the report read.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight told City A.M.: “This only serves to highlight the scale and extent of the challenges facing households with the upcoming one-off £400 government support payment potentially only scratching the surface of soaring household energy bills and highlighting the need for an enduring solution.”