Energy bills to hit £4200 a year in 2023, as experts predict massive rises AGAIN
Industry experts expect to see bills hit £4,200 - Money Saving Expert Martin Lewis describes it as "tragic news"
Last updated 9th Aug 2022
In another blow for family finances, energy bills will rise by around £200 more than previously thought between October and November this year and will increase even further in January.
The energy consultancy Cornwall Insight, who monitor wholesale gas and electric supply prices, said bills will reach approximately £3,582 per year for the average household from October.
It is then forecast that bills will skyrocket to £4,266 from January, and £4,427 from April.
That's a monthly bill of close to £370 for the average user.
Ofgem will announce the new official price cap at the end of August, and it will kick in on October 1st.
Another massive rise for energy bills
Cornwall Insights says it'll be close to this time next year before prices fall again, but will still be above the levels we're paying now.
They predict the cap will hit £3,810 in the three months from July and £3,781 from October next year.
Cornwall blamed the new increase on rises in the wholesale price of energy and changes that regulator Ofgem has made to how it calculates the price cap.
Writing on Twitter, Money Saving Expert Martin Lewis described the price rises as "tragic news", saying: "Action & planning is needed now. "These amounts are unaffordable for millions. The January figure equates to 45% of the full new state pension, and a higher proportion of the old one.
"The rise alone on the Jan prediction, from when the help was first announced in May, is roughly £1,400/yr."
Money Saving Expert Martin Lewis: "This will leave many destitute"
Martin continued: "That rise alone swallows up not just £400 help for all homes, but even the £1,200 for the poorest. This will leave many destitute. Tax cuts won't help poorest including many elderly & disabled who've higher usage.
"Cutting green levy would be just (a) tiny sticking plaster on a gaping wound.
"This is a desperate."
New Ofgem pricing structure blamed for latest rocketing prices
Last week Ofgem announced changes to how it will calculate the price cap on energy bills going forward.
"While our price cap forecasts have been steadily rising since the summer 2022 cap was set in April, an increase of over£650 in the January predictions comes as a fresh shock," said Craig Lowrey, principal consultant at Cornwall Insight.
"The cost-of-living crisis was already top of the news agenda as more and more people face fuel poverty - this will only compound the concerns.
"Many may consider the changes made by Ofgem to the hedging formula, which have contributed to the predicted increase in bills, to be unwise at a time when so many people are already struggling."
However, he also defended Ofgem's decision, which will hopefully lead to lower bills in the second half of next year.
This will happen because Ofgem is making it easier for energy suppliers to recover their costs. By doing this, fewer suppliers will fail - and the cost of those failures will not need to be passed on to customers.
"With many energy suppliers under financial pressure, and some currently making a loss, maintaining the current timeframe for suppliers to recover their hedging costs could risk a repeat of the sizable exodus seen in 2021," Mr Lowrey said.
"Given that the costs of supplier failure are ultimately met by consumers through their energy bills, a change which means that this is less likely is welcome, even if the timing of it may well not be."
Part of the increase in the forecast is also due to rising wholesale energy prices, Cornwall said.
Current government support "not enough now"
Dr Lowrey said that the Government must take action to step in and protect households from the runaway costs.
The Government has already promised£400 to every household, and extra help for the more vulnerable.
"If the £400 was not enough to make a dent in the impact of our previous forecast, it most certainly is not enough now," Mr Lowrey said.
He said that the current price cap is not controlling consumer prices and damaging suppliers' business models, and asked if it was fit for purpose.
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"The Government must make introducing more support over the first two quarters of 2023 a number one priority.
"In the longer-term, a social tariff or other support mechanism to target support at the most vulnerable in society are options that we at Cornwall Insight have proposed previously.
"Right now, the current price cap is not working for consumers, suppliers, or the economy."
Interest rates and inflation go up
Inflation rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022. With interest rates also rising to 4%, those saving money will earn more interest on their finances, whilst those paying mortgages would pay more interest to the bank.
Energy bills
The price of energy went up incredibly as the cost of living crisis hit, with the gas price spike caused largely by the war in Ukraine. The price cap - which is set by an independent regulator to help offset costs onto customers - was set to rise to £3,549 for an average home in October but a price freeze from the government restricted the typical bill to £2,500. That's still an increase of 27% from the previous energy cap and as it's a cap on unit cost, the more energy you use the higher your bill will be.
Food prices
The cost of a weekly shop also has gone up as a result of the cost of living crisis. As a result of the war in Ukraine, a number of products including cooking oils and wheat have been disrupted. This means that several products are now considerably more expensive, driving bills up for customers.
Prices at the pumps
The average cost of petrol has also rose to unprecedented levels. Supply lines for petrol have been thrown into doubt as a result of the war in Ukraine, as Russia is a large export partner for gas, oil and fuel. In April 2022, the average price for a litre of petrol on the forecourt was 160.2p, whilst a litre of diesel would cost 170.5p. By late June 2022 the price had risen to an average of 190.9p for a litre of unleaded and 198.9p for a litre of diesel. In March 2023 the price wass on average of 147.03 in petrol and 167.04 in diesel.
Average cost of filling up a car with petrol hits £100
On 9th June 2022, the average cost of filling up a car with petrol hit £100 for the first time ever. Diesel had already hit that milestone. It comes as the cost of fuel hit a record high of one pound eighty a litre. The 2p rise was the biggest daily jump in 17 years. Prices have dropped by at least 20p per litre since the high point.