Households will this week learn how much energy bills are set to increase from July, as the regulator Ofgem updates the price cap. Forecasts point to a rise of more than £200, driven by the Iran war, raising fears of a painful winter ahead.
Price Cap Rise Expected
Ofgem will reveal the annual energy price cap for July to September on Wednesday. Analysts at Cornwall Insight predict the cap will rise by £209 to £1,850, a 13% increase on April's cap of £1,641. The cap sets a maximum price per unit of gas and electricity, meaning households only pay for the energy they use.
While the increase will be mitigated by lower usage in summer, concerns are growing over the October review, when demand rises as temperatures drop. Cornwall Insight forecasts the cap in October will remain at a similar level, even if the Middle East conflict ends soon, due to infrastructure damage and disrupted supply chains.
Government Response
Calls have mounted for the government to support the most vulnerable. Chancellor Rachel Reeves told MPs: "We stand ready to act if market conditions worsen significantly later this year." However, her recent cost-of-living plan did not include immediate energy measures.
Energy costs have soared after Iran blocked the Strait of Hormuz, a key route for a fifth of the world's oil and gas. Households have yet to feel the full impact, as the cap is reviewed quarterly. April saw a 7% drop thanks to government measures, including moving 75% of renewables obligation costs from household bills to general taxation and scrapping the energy company obligation scheme.
Warning from Campaigners
Simon Francis, coordinator of the End Fuel Poverty Coalition, warned of an "extremely difficult winter" ahead. "Households need reassurance and support, not a summer of suspense. The government must act before winter to spell out what support will be available," he said.
The government insists tackling the affordability crisis is its top priority. Its support package includes a VAT cut on attraction tickets, free bus travel for children in England during August, extending the 5p fuel duty cut, and lowering import tariffs on over 100 food products. However, the lack of further action on energy bills is seen as holding back consumer spending.
Economist Martin Beck of WPI Strategy noted that recent retail sales figures for April already show "energy pressures are biting." He added: "Higher petrol prices, the prospect of an increase in household energy bills in July, and weakening consumer sentiment all point to a more cautious spending backdrop."
