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Martin Lewis says that he ‘feels sick’ after getting some insight into the future of household energy prices.
On Twitter, Lewis wrote: “I feel sick writing this!
“I've just got the latest price cap predictions from [energy market analysts Cornwall Insights].
“A huge spike in the key year-ahead wholesale price means OCT [October] cap prediction UP 64% (so £3,244/yr on typical bills)
“JAN [January] cap prediction UP 4% (so £3,363/yr)”
He continued: “It's horrendous.
“Especially as we're now near the end of the assessment period that sets Oct's cap, so this is the right ball park.
“The Oct prediction is now £450/yr HIGHER than Ofgem mooted in May & that was what Sunak based the £400-£1,200/yr help on.
“More will be needed!”
Good job there’s a stable government in place just now, eh?
In an attempt to explain why energy costs continue to skyrocket, Lewis added: “It is Ofgem who sets the price cap (which is now really a price floor) based on wholesale prices and the requirement to hedge to have forward supply.
“The big profits aren't being made by retail energy suppliers, but by oil & gas producers (tho [sic] sometimes they're the same firms).”
If all of this seems a bit nebulous and hard to take in, the bottom line is that those who are struggling the most with the cost-of-living crisis are set to be hit even harder at a time when energy usage is much higher than during the summer months.
It ain’t looking good, in short.
There are a number of reasons for this that are beyond the control of the government, such as the ongoing war between Ukraine and Russia.
That – amongst other factors - has driven wholesale prices for oil and gas higher, but it serves only to pass the extra cost onto the average household.
The Cornwall Insight analysis had previously warned that annual energy bills could rise from £1,971 on standard default tariffs to £2,980 in October, then £3,003 in January 2023.
However, their revised estimates state that the £1,971 price cap will rise to £3,245 in October, then £3,364 in January.
Cornwall Insights principal consultant Dr Craig Lowery told iNews: “As the energy market continues to grapple with global political and economic uncertainty, the corresponding high wholesale prices and the UK’s continued reliance on energy imports has once again seen predictions for the domestic consumer default tariff cap rise to what are even more unaffordable levels.
“There is always some hope that the market will stabilise and retreat in time for the setting of the January cap.
“However, with the announcement of the October cap only a month away, the high wholesale prices are already being baked in to the figure, with little hope of relief from the predicted high energy bills.”
He continued: “Ofgem [is] continually reviewing the cap and there are a raft of consultations and potential reforms which could impact these forecasts.
“However, as it stands, energy consumers are facing the prospect of a very expensive winter.”
It remains to be seen whether the government – what remains of it – will introduce new measures to help those who are set to struggle with the rising costs.
That’s just about everyone.