Energy price-cap expected to increase to £2,800 in October
Ofgem chief executive Jonathan Brearley has been speaking to a parliamentary committee
Last updated 24th May 2022
The energy price cap, which already increased by an average of £700 per year in April is expected to go up by over £800 in October.
Ofgem chief executive Jonathan Brearley told the Business, Energy and Industrial Strategy Committee that they are expecting a price cap in October in the region of £2,800.
He said: “I am afraid to say conditions have worsened in the global gas market since Russia’s invasion of Ukraine. Gas prices are higher and highly volatile. At times they have now reached over 10 times their normal level
“I know this is a very distressing time for customers but I do need to be clear with this committee, with customers and with the government about the likely price implications for October.
“Therefore later today I will be writing to the Chancellor to give him our latest estimates of the price cap uplift.
“This is uncertain, we are only part way through the price cap window, but we are expecting a price cap in October in the region of £2,800.”
The energy price cap
The price cap, which was designed to stop companies charging too much, is now setting the minimum amount you can pay, after looking at national and global supply factors.
Earlier this year, Ofgem decided 54% was a fair increase for energy companies to charge, pushing bills up to £1,971 per household.
That increase came in on the 1st April, with the next review planned for October.
The response from government
Downing Street acknowledged that energy prices were a “significant challenge” after Ofgem’s chief executive Jonathan Brearley suggested the cap could rise to around £2,800 in October.
The Prime Minister’s official spokesman said some of the help from the Government was “phased throughout the year”.
“Some of the support is designed to come in in October, £200 will be discounted from energy bills, the warm home discount will increase to £150 and be expanded to cover three million people, cold weather payments and winter fuel payments will be available again,” the spokesman said.
The Government was also “actively looking at what more could be done in this space, that’s something that the Chancellor and Prime Minister are focused on”.
Cost of living crisis
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.