Around 15 million households across the UK will face a £178 annual hike on their energy bills as the price cap is set to increase to another record high from April.
It is expected that the price cap could rise to £1,455 for the average household, according to experts at research agency Cornwall Insight.
Record high energy costs
The energy price cap increased to £1,138 from 1 April, which marked a rise of £96 for “medium” energy users.
From 1 October, another 12% increase will come into force, with the cap rising to a record-high £1,277 and affecting around 11 million households.
The expected rise to £1,455 in April next year would mark a 14% increase on the October rise, which is £317 higher per year than current levels.
The price hike comes after the cost of gas on wholesale markets rocketed at unprecedented rates, up 70% since August and 250% since the beginning of the year, according to trade body Oil & Gas UK.
The cap only applies to customers who are on a standard variable tariff, which is usually the most expensive.
Cornwall Insight senior consultant Dr Craig Lowrey said: “Although the winter 2021-22 cap was a new record (£1,277 for a typical dual fuel direct debit customer), Cornwall Insight modelling indicates that – given the extent of the increases in the wholesale market and the manner in which the cap is set – this is set to be surpassed by that for summer 2022.
“We would need to see a material and sustained reduction in the wholesale market to avoid the kind of cap levels we are predicting for the period.”
Dr Lowrey’s team also predicted that high prices are likely to remain and while the cap will drop slightly next winter to £1,416, it would be the second highest level on record by some distance.
A separate estimate from BFY Consulting said April’s price cap might reach as high as £1,555 instead.
Why are prices going up?
The spike in the energy price cap forecasts reflects the unexpectedly large upswing in gas prices in recent months.
As recently as July, Cornwall Insight had predicted the cap to be cut to £1,251 in April and down again to £1,219 for the winter of 2022.
Predictions are based on the current wholesale prices of gas and electricity and any changes to costs will be taken into account by Ofgem when it announces the next price cap early in 2022.
Regulator Ofgem reviews the energy price cap every six months and it is set to help control the cost of gas and electricity in the UK.
The price cap is calculated based on the usage of a typical household that buys both gas and electricity, with households that use more energy paying more.
The escalating prices of gas and electricity in the UK has been blamed on a number of factors, including a longer winter last year that left gas stocks depleted, higher demand and a fall in exports from Russia.
Business Secretary Kwasi Kwarteng has said that the energy price cap will remain in place over winter and promised “there’s absolutely no question of the lights going out or people being unable to heat their homes.”
This article originally appeared on our sister site, NationalWorld.