UK household energy bills could rise over £200 from July

Energy bills for households in Great Britain could increase by more than £200 a year to almost £1,900 from this summer in “a kick in the teeth” for millions struggling with the cost of living crisis.

A typical gas and electricity bill is forecast to rise to the equivalent of £1,850 a year from July under the industry regulator Ofgem’s quarterly price cap, according to analysis by the energy consultancy Cornwall Insight.

The expected level is nearly 13% higher than the £1,641 cap on energy bills set for April to June, adding £209 to a typical annual bill, after the Iran war caused the UK’s gas market price to double earlier this year.

The main driver for the increase is rising wholesale energy prices, according to Cornwall. Prices climbed sharply in February and March after Tehran effectively cut off Gulf energy supplies to the global market by shutting the strait of Hormuz in response to the US-Israeli strikes on Iran.

The regulator determines the maximum price of each unit of gas and electricity based on the cost of supplying energy to homes, including the average wholesale market costs in the months leading up to the start of each new cap.

A temporary ceasefire allowed markets to retreat from the historic highs recorded in March, when Cornwall estimated that the cap could rise to almost £2,000 a year, but market prices have remained much higher than usual in a blow to households already contending with the rising cost of essentials, including council tax and water.

The chancellor, Rachel Reeves, is expected to announce a package of measures on Thursday to reduce the rising cost of living. This could include a decision to scrap the planned 1p fuel duty increase scheduled for September, and the 5p rise that was due to happen in stages over the subsequent six months.

Although the summer energy cap rise will be painful for households, the bigger concern is bills from October when households typically start using more energy in autumn and face higher bills as a result.

Cornwall said that, even if the Iran war ended 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”.

Its principal consultant, Craig Lowrey, said: “If the cap stays at a similar level as July, that is when the government will need to think seriously about targeted support for the most vulnerable.

“Building out our renewable capacity is the only real path to bills that aren’t as exposed to events thousands of miles away. It won’t be cheap, and bills will not see an immediate drop, but that is the direction of travel if we want genuine, lasting stability.”

Danny Gross, an energy campaigner at Friends of the Earth, said: “Yet another rise in energy bills will be a kick in the teeth for the millions of people already struggling with the cost of living.

“If we’re to break free from our dependence on fossil fuels, then we must rapidly roll out clean, homegrown renewable energy – which is now cheaper than oil and gas – alongside insulating homes. This is how we can permanently lower bills and shield people from another energy price crisis.”

In the short term, switching websites have urged households to consider moving to a fixed-rate energy deal. A number of fixed tariffs currently undercut the predicted price cap for July, according to uSwitch. This could save households money on their summer energy bills, and possibly on winter costs too if the price cap remains at similar levels or higher.

A government spokesperson said: “Tackling the affordability crisis is our No 1 priority. The lesson of yet another fossil fuel crisis is the UK needs to get off the fossil fuel rollercoaster and on to clean homegrown power we control.”