Ofgem forecasts energy price cap to rise by £800 to reach £2,800 in October
Date published: 27 May 2022
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The cost of gas continues to be extremely high
The energy price cap could increase again this year by a further £800, Ofgem is forecasting, reaching a high of £2,800 in October.
Ofgem says it estimates the energy price cap is likely to increase to “the region of £2,800 a year” in October, as the “volatility seen in the energy market has worsened considerably since Russia’s invasion of Ukraine, with gas prices reaching highs never seen before.”
The price cap is updated twice a year and tracks wholesale energy and other costs.
It stops energy companies from making excessive profits, ensuring customers pay no more than a fair price for their energy.
The price cap allows energy companies to pass on all reasonable costs to customers, including increases in the cost of buying gas.
Ofgem says it knows this “likely increase will be very concerning for customers” and is “ensuring that the price for consumers does not allow suppliers to make unreasonable profits.”
It adds: “The price cap must reflect the real costs that suppliers are having to pay. We cannot force domestic suppliers to sell the gas they provide to homes at a loss.
“Most are not currently turning a profit, which puts them at risk of failure, disrupting supply and piling up costs for consumers, particularly the most vulnerable, which is our ultimate concern.
“We are acutely aware that this further increase in the price of energy, caused by the conflation of huge global issues, will cause very real affordability issues for many households.”
Ofgem notes it will “firmly” hold suppliers to account on supporting customers with payment problems and providing them with available support.
Households in England, which are in council tax bands A-D, will receive a £150 rebate which will not need to be repaid, whilst the government has pledged to provide each household with a £400 grant, replacing the previously reported Energy Bills Rebate loan of £200. There are additional grants available to pensioners and housholds in receipt of certain benefits.
The price cap last increased in April 2022, at a cost of £700. This increase was driven by an ‘unprecedented record rise in gas prices’ with costs passed onto customers from April.
Over the prior six months there was a record rise in global gas prices with wholesale prices quadrupling in the last year.
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