The price cap on default tariffs has been predicted to rise to £3,420 in October and then £3,850 in January next year after wholesale gas and power prices hit new record highs on Tuesday (26 July).
Based on typical consumption patterns, BFY said this would mean the average dual fuel consumer paying by direct debit would face a bill of more than £500 for January alone.
The consultancy issued the forecast following a drop in gas supplies from Russia via the Nord Stream 1 pipeline, which pushed the National Balancing Point (NBP) price for gas delivered over the coming winter to 482 pence per therm at Tuesday’s close and baseload power prices for the season to £519/MWh – both all-high time highs for winter contracts.
“Wholesale prices have shown further increases in the last few weeks with concerns over winter supply with the ongoing tensions with Russia,” said BFY senior consultant Dr Gemma Berwick.
“In the last couple of days, it was announced that flows on Nord Stream 1, which carries Russian gas to Europe, would drop to 20% of capacity which has caused further price increases. The winter-22 NBP contract closed at all-time highs for a winter product last night. This means that the forecast price caps for Q4-22 and Q1-23 have also increased.”
BFY’s forecast for the January price cap is almost £500 higher than Cornwall Insight’s latest forecast of £3,364 issued less than a month ago on 8 July. The price cap on default tariffs is currently set at £1,971 per year, having already risen by £693 in April.
Earlier this week, the Business, Energy and Industrial Strategy Committee urged the government to “immediately update” its energy bill support package for vulnerable customers, saying it was “no longer sufficient” and will be “eclipsed by the scale and longevity of the price increases now expected.”
Based on the latest forecasts at the time, the charity National Energy Action predicted last week that 8.2 million households – around one in three in the UK – would fall into fuel poverty when the price cap next increases in October.