Energy prices will rise again in October, putting more pressure on struggling households, warned Ofgem boss Jonathan Brearley.
The watchdog’s chief executive told Sky News that there has been a sustained increased in gas prices following Russia’s invasion of Ukraine, from already elevated levels.
This means when the consumer price cap is next updated this autumn, energy users will pay even more to heat their homes than they currently are.
Last month, the cap was hiked an eye-watering 54 per cent to nearly £2,000 per year, and the Bank of England has recently forecast a further 40 per cent rise later this year.
He said: “The difficult news I have is it is likely that in October prices will go October. But what we will do is make sure you pay no more than you need to for the cost of your energy, and we won’t be going back to the bad old days where you unfair profits were charged by the retailers on top of that.”
When asked by Kay Burley if things are going to get worse before they get better, he conceded that “things will get tougher”.
Even though the market remains volatile, Brearley argued it was right to warn customers of likely price rises in October.
The price cap has been hiked to reflect soaring wholesale costs, and to compensate for market carnage that has seen 29 suppliers exit the industry since last September.
The instability, caused by record gas prices, poor hedging strategies and the constraints of the price cap – which prevented firms passing on losses prior to the recent raise -has cost the taxpayer billions of pounds and directly affected over four million customers.
Bulb Energy, the UK’s seventh biggest energy supplier, which is home to 1.7m customers, fell into de-facto nationalisation last November, and has been propped up with over £2bn in public funds.
This makes it the biggest state bailout since RBS in 2008, with no deal yet reached for taking over the supplier.
Watchdog pushes for quarterly price caps
Brearley was speaking to Sky News following Ofgem’s announcement that it is in favour of a quarterly update to the price cap.
It has opened a ‘minded-to’ consultation looking into whether it should be updated quarterly rather than twice a year.
Ofgem argues the reform could make the market fairer and more resilient, as a more frequent price cap would reflect the most up-to-date energy prices.
This would also mean when wholesale prices ease from historic highs, energy will see this reflected in their bills much sooner.
However, if wholesale prices remain historically elevated it could mean energy users face bills rise four times over the course of 12 months.
Potentially, this could include a painful price hike in January next winter, during the depths of winter when energy demand is at its highest.
Energy specialist Cornwall Insight has warned the high energy prices could be baked into the market for at least the next three years.