Energy bills forecast to rise by £209 in July amid fears over winter cost crunch

The household energy price cap is predicted to rise by £209 a year from July amid the fallout of the Iran war and experts warned over an impending payment shock from the autumn as demand surges in the cooler months.

Cornwall Insight said its prediction for Ofgem’s cap from July to September now stands at £1,850 for a typical dual fuel household, an increase of 13% on April’s £1,641 annual cap.

This is slightly higher than the 12% increase it forecast last month.

But fears are mounting over the hit to households when the cap is reviewed in October and energy demand rises as temperatures drop, with calls growing for the Government to set out action to support the most vulnerable.

It said: “While households will be understandably frustrated by a rise during the summer, the impact will be reduced as household energy usage typical falls during the hotter months.

“The bigger concern is October, when demand picks up again and current forecasts point to a similar cap level as July.

“While the October cap will depend on how the Middle East conflict unfolds, even if the conflict were to end tomorrow, the physical damage to infrastructure, and lingering effect of disrupted supply, means a fall back to April’s price cap levels in the autumn looks unlikely.”

Ofgem adjusts its price cap every three months and will announce the next level for July to September on May 27.

Wholesale markets have been highly volatile since the start of the Middle East conflict at the end of February, with Cornwall Insight at one stage predicting annual household energy bills could surge by as much as £332 to £1,973 from July.

Energy costs have been sent rocketing higher by Iran’s move to block the crucial Strait of Hormuz shipping route, through which a fifth of the world’s oil and gas is carried.

Craig Lowrey, principal consultant at Cornwall Insight, said: “Over the past few months, we’ve watched our forecasts shift from showing virtually no quarter-on-quarter increase to a 13% rise in current bills – with this change due to the impacts of the Middle East conflict.”

He said if October’s cap remains similar to the level for July, “that is when the Government will need to think seriously about targeted support for the most vulnerable”.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “If bills remain high when heating season begins, millions of households already in energy debt or struggling to keep their homes warm will face an extremely difficult winter.

“Households need reassurance and support, not a summer of suspense.

“That means the Government must act before winter to spell out what support will be available.”