Cost-of-living crisis: Household energy bills to stay two-and-a-half times pre-crisis levels until at least 2024 in dire new prediction
Household energy bills are likely to remain at more than two-and-a-half times their pre-crisis levels until at least 2024, a dire new prediction has warned.
Cornwall Insight, one of the country’s most respected energy consultancies, said bills would hit a staggering £3,359 per year from October for the average household, and not fall below that level until at least the end of next year.
The price cap on energy bills, which regulates what 24 million British households pay, will hit £3,616 from January and rise further to £3,729 from April.
It will begin to fall after that, but only slowly, reaching £3,569 from July before hitting £3,470 for the last three months of 2023.
The latest price cap predictions are hundreds of pounds above previous forecasts from Cornwall Insight, but are slightly lower what another consultancy, BFY, has predicted.
In May, the Government announced an energy costs support package – worth £400 per household – in response to predictions that bills would rise to £2,800 for the average household in October.
The package also promised extra support for more vulnerable households.
Last month, Cornwall Insight predicted annual energy bills would typically rise to £3,244 from October and £3,363 from January, but circumstances have changed significantly since then.
“Customers will be sadly used to these ever-increasing price cap forecasts,” said Craig Lowrey, principal consultant at Cornwall Insight.
"We have less than a month until the new price cap is announced and given the trends in the wholesale market and the concerns over Russian supply, unfortunately the only change to the prediction is likely to be up.
“While the rise in forecasts for October and January is a pressing concern, it is not only the level but the duration of the rises that makes these new forecasts so devastating.”
Dr Lowrey joined other experts in saying Government support would “only scratch the surface” for households.
“While the Government has pledged some support for October’s energy rise, our cap forecast has increased by over £500 since the funding was proposed, and the truth is the £400 pledged will only scratch the surface of this problem,” he said.
Dr Lowrey warned “tinkering with VAT and policy costs will only make a dent in bills”.
On Friday, Richard Neudegg, director of regulation at Uswitch, called for the £400 to be increased to at least £600, and for payments to vulnerable households to rise from £650 to £950.
“The Government did the right thing by stepping in with wide-reaching support to try to help ease the blow. However, this support now looks like a severe under-estimation of what consumers need,” he said.
“Households need clarity to help them plan for the most expensive winter in living memory.”
Charity National Energy Action last month predicted that, should the average bill reach £3,250 per year, 8.2 million UK households, or one in three, will be in fuel poverty.
Responding to Cornwall Insight’s research, Citizens Advice Scotland social justice spokesperson Stephanie Millar said: “This would be a hammer blow to people already seeing their budgets stretched to breaking point, and underlines that the cost-of-living crisis isn’t going anywhere.
“There is a real risk of a lasting legacy of poverty, debt and destitution following this crisis. People are going to be feeling the effects of it for years to come, having been swept up in a tsunami of rising prices and falling incomes.
“The most important thing people can do is seek advice. The Citizens Advice network offers free, impartial and confidential advice and we get real results for people – on average those who see a financial gain through our advice are over £4,400 better off. We’re for everyone regardless of background and circumstance and we don’t judge, we just help.”
Personal finance expert Martin Lewis had last week suggested people would be "panicking" over their energy bills as he warned the situation would "be desperate" when bills rise this winter.
He has called on Westminster to do more now to help the poorest households.
"It's going to throw many households into a terribly difficult financial situation," he told the BBC.
The UK Government has announced households in Scotland, England and Wales will receive a £400 discount to help with rising fuel bills this autumn with the money to be paid in six instalments.
The first instalment of payments to those on benefits started being made from July 14.
All customers with a domestic electricity meter who pay by direct debit, either monthly or quarterly, or by card will see an automatic deduction off their bills.
Those with "smart" prepayment devices will see an automatic monthly top-up added to their account, meaning they will have to add less credit to their meter for the total energy they use.
Lord Callanan, the UK minister for business and energy, said last week: "This is just one small part of a wider package of measures. The problem is that there are many people who are not on means-tested benefits or just above benefit level who are still really struggling with really high bills, so we thought this was the fairest and easiest way to distribute the money."
Figures provided by energy regulator Ofgem show more than four million households use prepayment meters in Britain. Less than half of those meters – 1.9 million – are smart devices that will allow this payment to be made quickly and easily.
A spokesperson from the Department for Business, Energy and Industrial Strategy said: "While no government can control global gas prices, we are providing £37 billion of help for households, including the £400 discount on energy bills, and £1,200 of direct support for the most vulnerable households to help with the cost of living."