Britain's Energy Price Cap to Rise 13% in July, Warns Cornwall Insight
Energy Price Cap Increase and Market Drivers
Forecasted Rise in Energy Bills
LONDON, May 19 (Reuters) - Britain's domestic energy price cap is forecast to rise by around 13% in July from current levels, analysts at Cornwall Insight said on Tuesday,
Impact on Household Bills
• Energy bills are forecast to rise by 209 pounds ($280) to 1,850 pounds a year for a typical dual-fuel household from July. The new cap would represent an increase of 13% on the current 1,641 pounds annual bill.
Factors Behind the Increase
Wholesale Price Surges
• The main driver for the increase is higher wholesale prices, which climbed in February and March after U.S. and Israeli missile strikes on Iran and subsequent Iranian attacks that damaged Gulf energy infrastructure and triggered the closure of the Strait of Hormuz, through which about 20% of the world's oil and liquefied natural gas usually passes.
Market Stability and Ongoing Risks
• Although a temporary ceasefire has brought some calm to markets, wholesale prices have remained elevated.
Role of Wholesale Prices in Price Cap
• Wholesale energy prices are the largest single factor contributing to British energy regulator Ofgem's domestic price cap, which is set on a quarterly basis using a formula that also reflects suppliers' network costs and environmental and social levies.
Future Outlook and Analyst Commentary
Concerns for October and Beyond
• "The bigger concern is October when demand picks up again and current forecasts point to a similar cap level as July," the Cornwall Insight analysts said.
Potential Impact of Geopolitical Events
• "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," they added.
($1 = 0.746 pounds)
(Reporting by Nina Chestney. Editing by Mark Potter)
