Pressure is mounting on the Government to announce a new support package for poor families as electricity bills from January are predicted to top £4,200.
Consultancy Cornwall Insight said on Tuesday it expected the energy price cap to reach £4,266 a year in the first three months of next year.
Bills could reach £4,426 in the second quarter of next year before falling, the consultants predict. Only a week ago, Cornwall Insight predicted that there would be a cap on energy prices on track to rise to £3,615 a year from January.
Cornwall Insight said rising wholesale prices and a review of the methodology used by regulator Ofgem to calculate the price cap were the reasons for the increased forecasts.
The consultancy’s chief adviser, Dr Craig Lowry, said: “It is vital that the government uses our forecasts to drive a review of the support package offered to consumers.”
The consultants now expect the cap to reach £3,582 from October, up £200 on the last forecast. Bills are expected to start falling next summer to £3,810 in the third quarter and then to £3,781 in the final three months of next year.
The limit, which is set quarterly by energy industry regulator Ofgem, was at £1,400 a year as recently as October last year.
This was stated by former chancellor Rishi Sunak £15bn consumer support package in May, including £400 per household. However, rising wholesale prices have since threatened to erode the impact of that support, and Sunak and his Tory leadership rival Liz Truss are under pressure to announce further measures.
Lowry said: “If £400 wasn’t enough to affect the impact of our previous forecast, it certainly isn’t enough now.
“The government must make the introduction of more support during the first two quarters of 2023 its number one priority. In the longer term, Cornwall Insight and I have previously proposed a welfare rate or other support mechanism aimed at supporting the most vulnerable sections of society. Right now, the current price cap is not working for consumers, suppliers, or the economy.”
Ofgem plans to adapt the formula used to calculate the top price in October to allow suppliers to better manage the risks from volatile wholesale prices and prevent rising prices for consumers as a result of supplier bankruptcies.
The regulator is trying to prevent a repeat of last year’s events, when nearly 30 suppliers collapsed, including due to rising wholesale energy prices.
Lowery said the formula change has led to increased predictions. However, he said the move would protect cost-struggling providers and prevent the cost of their collapse from being added to consumers’ bills.