Energy bills are expected to reach more than £4,200 for a typical household by next year, a consultancy has warned.
In a new gloomy outlook for households, Cornwall Insight said October bills will rise to around £3,582 from £1,971 today, before rising even further in the new year.
Martin Lewis said the amounts were “priceless” for millions.
Will energy prices go up again?
Ofgem will set the price cap at £4,266 for the average household for the three months from early January.
The energy consultancy said that was around £650 more than its previous forecast.
Cornwall’s price cap forecasts showed bills hit £4,427 in April before eventually falling slightly to £3,810 from July and £3,781 from October next year.
Why are the prices so high?
The consultancy said Ofgem’s decision to change the price cap every three months instead of six and higher wholesale prices were one of the reasons for the sharp rise.
dr Craig Lowrey, Principal Counsel at Cornwall Insight said: “Many may find the changes made by Ofgem to the hedging formula, which have contributed to the projected 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 result in lower bills in the second half of next year.
This is because Ofgem makes it easier for energy suppliers to recoup their costs. As a result, fewer suppliers fail – and the costs of these failures do not have to be passed on to customers.
“With many utilities under financial pressure and some currently making losses, maintaining the current timeframe for suppliers to cover their hedging costs could risk a repeat of the sizeable 2021 exodus,” said Dr. Lowrey.
“Given that the cost of a supplier failure is ultimately borne by consumers through their energy bills, a change that means it’s less likely to do so is welcome, even if the timing might not be.”
dr Lowrey said a review of the support packages being offered to consumers is essential.
He said: “If the £400 was not enough to spoil the impact of our previous forecast, it is certainly not enough now. The government must give top priority to rolling out more support in the first two quarters of 2023.
“In the longer term, a social tariff or other support mechanisms to target support to the most vulnerable in society are options that we at Cornwall Insight have previously proposed. Right now, the current price cap is not working for consumers, suppliers or the economy.”
How did Martin Lewis react?
The consumer advocate said it was “tragic news” and that the increases would leave “many destitute”.
After taking a hiatus from social media, he broke it off to react to the news, saying it was “too big and too damaging not to use my platform to push for sensible urgent action on the part of the community.” exercise political power”.
In a Twitter thread, the Money Saving Expert said the government must act.
He said: “These amounts are beyond the reach of millions. The Jan value is 45% of the full new state pension and a higher proportion of the old. The increase from the Jan forecast alone since the aid was first announced in May is around £1,400/year…
“That increase alone eats up not only £400 in aid for all households, but even £1,200 for the poorest. This will leave many destitute. Tax cuts will not help the poorest, including many older and disabled people who have higher consumption. Reducing the environmental tax would be just a small band-aid on a gash…
“The leadership debate can no longer ignore this ominous national catastrophe. – They can’t say they weren’t warned. In May the Ofgem government asked for foresight and made plans based on that. Now he can too.
He ended his thread by saying “a plan of action is needed today” and that livelihoods, spiritual well-being and in some cases “very lives depend on it”.
What else was said?
Ofgem said: “The wholesale market continues to be extremely fast moving therefore no forecast for next year is at all robust at this point and will therefore be of very limited value, particularly to consumers who must always be the main priority.
“We cannot discourage others from making predictions, but we ask that extreme caution be exercised in making predictions for the price cap in January or beyond.”
Meanwhile, Morgan Wild, head of policy at Citizens Advice, said the cost-of-living crisis was already “having a devastating impact on people’s lives”.
Morgan said: “Every day we hear from people who can’t afford to turn on the lights or cook a hot meal for their children.
“The government has done the right thing by providing targeted support, but it will not be enough for people to be able to cope with these previously unthinkable price hikes.
“The obvious place to start is to increase benefits to keep up with the cost of living. We have no time to waste.”