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Energy prices in the UK are poised to rise by 9% starting in October, as the country braces for the colder winter months. Ofgem is set to announce the updated energy price cap on Friday.
Cornwall Insight analysts predict that the cap will increase from its current level of £1,568 to approximately £1,714. This figure represents the projected annual cost for an average British household.
The anticipated increase is attributed to recent volatility in the global energy market. Gas prices have surged in recent months, driven in part by geopolitical tensions, notably the ongoing conflict between Russia and Ukraine. This escalation has significantly impacted energy costs.
The new cap, effective from October, will determine energy unit prices for the last quarter of the year. This follows a period of lower energy costs from July to September, which saw the lowest prices in two years.
Cornwall Insight highlighted that while a price increase ahead of winter was anticipated, further market fluctuations could arise if the conflict between Russia and Ukraine continues. Principal consultant Craig Lowrey noted that although extreme price levels seen in recent years are not expected to return, it is unlikely that energy bills will revert to previous norms. The situation underscores that without significant intervention, the elevated prices may become the new standard.
For comparison, Ofgem’s cap was set at £1,277 in October 2021, before the onset of the current geopolitical tensions. This context illustrates the impact of the conflict on energy pricing and emphasizes the need for ongoing scrutiny of energy market developments.
