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Britain’s energy price cap to rise 1% in January, forecasts Cornwall Insight
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LONDON (Reuters) – Britain’s domestic energy price cap is expected to inch up by 1% in January, with geopolitical tensions and weather disruptions keeping wholesale energy prices high, analysts at Cornwall Insight said on Monday.
Energy regulator Ofgem sets a cap on household energy bills each quarter using a formula that reflects wholesale energy prices and also takes into account suppliers’ network costs and environmental and social levies.
Britons had hoped energy prices would cool to help them cope with a cost of living squeeze and after the government removed some energy bill support for many older people this winter.
“Supply concerns have kept the market as volatile as earlier in the year… While we may have seen this coming, the news that prices will not drop from the rises in the Autumn will still be disappointing to many as we move into the colder months,” Craig Lowrey, principal consultant at Cornwall Insight, said.
Cornwall Insight forecasts Ofgem’s price cap will rise in January to 1,736 pounds ($2,190.14) a year based on average use, up from 1,717 pounds a year now.
Energy regulator Ofgem had already increased the cap by 10% for the October to January period.
Wholesale gas and power prices are a major part of the formula Ofgem uses to calculate the price cap and they have remained high this year due to concerns over supply relating to conflict in the Middle East and flows to Europe from Russia via Ukraine which are expected to cease at the end of the year.
Cornwall said the cap is expected to fall slightly in April and again in October next year.
Regulator Ofgem is expected to announce its price cap level for January at the end of the week.
($1 = 0.7926 pounds)
(Reporting By Susanna Twidale; Editing by Susan Fenton)
An energy price cap is a limit set by regulators on the maximum amount that energy suppliers can charge customers for their energy usage, aimed at protecting consumers from excessive charges.
Wholesale energy prices refer to the cost at which energy is bought and sold in bulk on the market, influencing the prices that consumers pay for their energy.
Ofgem is the regulator for the electricity and gas markets in Great Britain, responsible for protecting consumers, promoting competition, and ensuring the energy supply is reliable and affordable.
A cost of living squeeze occurs when the costs of essential goods and services rise faster than wages, making it harder for consumers to afford their basic needs.
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