Cornwall Insight are releasing our final predictions for October’s Default Tariff Cap (Price Cap) prior to Ofgem’s announcement on Friday 26th August. Predictions show a typical household1 will be paying £3,554 equivalent per year for their energy bills. As the observation window for Q4 (Oct-Dec 2022), the period of time Ofgem use to monitor the market and calculate their cap, has now closed, we are not expecting any further updates to our predictions prior to the regulator’s announcement.
The Price Cap is not a maximum limit on consumer energy bills, but rather a cap on how much suppliers can charge per kWh of energy used and a maximum daily standing charge. For the first time, Cornwall Insight is also releasing its forecasts of the October unit rate (p/kWh) and standing charge (£/day) figures for electricity and gas, with these figures reflecting Ofgem’s underlying methodology for the Price Cap along with our own analysis.
While the predictions for the October cap have remained largely steady over the past two weeks, forecasts for 2023 have risen. The calculations reflect a 15% increase in wholesale prices in the last week. The highly volatile nature of the market means these figures are potentially subject to significant change – both up and down – over the next few months.2
Figure 1: Cornwall Insight’s default tariff cap forecasts, £ per year including VAT (dual fuel, direct debit customer, national average figures)
“While the energy price cap rise in April was already an unprecedent increase in domestic consumer energy bills, our final predictions for October are truly concerning. With the cost-of-living spiralling and households looking at an energy bill rise of over £1,500 equivalent per year, it is difficult to see how many will cope with the coming winter.
“Over the past few weeks, we have seen many public discussions on how consumers will be best supported with their bills. The relative merits of each policy are a matter of debate, however what is certain is the need for a comprehensive energy support plan, one which provides relief for consumers not just for this cap rise or the next, but which looks to deliver enduring support for consumer bills. The energy crisis is not something which can be solved with hastily pulled together, short-term policies that yield a percentage decrease here or a few months relief there. Although such policies may help to solve today’s problems, they risk being sticking plasters for a much deeper and longer-term problem.
“The energy market remains an incredibly volatile place, while the observation window for October’s cap has closed, and our predictions for the last quarter of 2022 are final, 2023 is a different story. Forecasts can, and will, rise and fall by hundreds of pounds over the coming months, as market conditions continue to change. However, one thing is certain, the cap is not protecting – nor will it protect – consumers from these high prices. The next few years will likely be overshadowed by this energy crisis, and there will need to be a serious review of how to deliver energy policy that helps households and businesses alike.”
