The incoming energy price cap will not stop bill increases, consultancy firm Cornwall Insight has warned.
Ofgem announced it was increasing the level of its safeguard tariff for a second time this year because of higher wholesale costs.
The regulator announced on Tuesday (7 August) that the level of the tariff will be raised by £47 per year for dual fuel customers to £1,136 from 1 October.
Cornwall Insight has launched a forecasting service and its chief executive predicts household energy prices are likely to continue to rise.
Gareth Miller, CEO at Cornwall, said:”Our new tariff cap predictor projects a £33/year uplift [to £630 per year] in the electricity safeguard tariff for summer 2019 on the level Ofgem has just set for winter 2018-19.”
The tariff is set at six-monthly intervals, and the next one for summer 2019 (1 April 2019 to 30 September 2019) is likely to be even higher, according to the industry experts.
Policy, networks and wholesale costs, the main elements to the household bill, are all projected to rise indicating pressure all along the value chain for energy suppliers.
Miller added: “Household energy prices are set to continue to rise despite Ofgem’s safeguard tariff or the government’s default price cap, which is set to replace it later this year.
“At a constant consumption the cap is increasing at 10 per cent year-on-year because of rising input costs to suppliers.
“Only if wholesale costs fall sharply will the pressure abate.”
Cornwall predicts that should the wholesale market prices remain the same as today for the rest of the year, pressures for increases will abate with a £6 a year fall for winter 2019 to £624 a year and then £639 a year for summer 2020.
The tariff cap predictor for the safeguard tariff utilises the official safeguard tariff model, along with Cornwall’s own forecasts of industry and other costs.
When the government’s methodology on the price cap is finalised the predictor will be updated to reflect this.
Speaking as the increase to the safeguard tariff was announced earlier this week, Dermot Nolan, chief executive of Ofgem, said: “Any price rise for customers is unfortunate. But while the level of the tariff will rise in October, these customers can be confident that this increase is justified and that their energy bill reflects the real cost of supplying gas and electricity.”
The energy price cap is expected to be in force from December 2018.