Britain's energy price cap to rise 16% in January, Cornwall Insight says

Britain’s Energy Price Cap Expected to Rise 16% in January, Cornwall Insight Says

Forecasts and Factors Influencing the Energy Price Cap

Current Forecast and Government Measures

LONDON, Sept 30 (Reuters) - Britain's quarterly domestic energy price cap is forecast to rise by about 16% in October, analysts at Cornwall Insight said on Wednesday, as the conflict in Iran continues to keep wholesale energy prices high.

• The forecast comes despite the government removing a 5% tax on domestic electricity prices from October, and after new Labour Prime Minister Andy Burnham gave his first major speechon Tuesday, where he spoke of the need to reduce energy costs.

Impact of Middle East Conflict on Energy Prices

• “This substantial increase is largely driven by the escalating conflict in the Middle East, which continues to disrupt gas supplies to the UK and the rest of the world,” Cornwall Insight said.

• Disruptions to shipping in the Middle East and curbed liquefied natural gas exports from Qatar, one of the world's largest gas exporters, have led to a surge in international gas prices.

Future Projections and Ofgem's Role

• Cornwall Insight forecasts energy regulator Ofgem's price cap will rise in January to £1,999 ($2,652.67) a year for typical use, up £276 from £1,723 in October, which would be the highest level since March 2023.

• 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.

• Ofgem sets the wholesale part of the cap using prices from a fixed period known as the observation window, which means the forecast for the cap level from January could change.

• “With that window for the January cap now nearly halfway through, the price rises seen in September are already locked in, making a January increase all but certain,” Cornwall Insight said.

Additional Information

($1 = 0.7536 pounds)

(Reporting By Susanna Twidale; Editing by Aidan Lewis)