Energy bills forecasted to rise by 5%

Energy bills are forecasted to rise by 5% from April, adding £85 a year according a latest forecast by consultancy Cornwall Insight.

For a typical dual fuel household it is predicted that the April price cap to be £1,823 per annum. This is a rise of £85 and 5% from the current price cap which was set at £1,738 per year for a typical consumer. This would mark a third consecutive price cap increase, with the situation looking unlikely to get better as the year progresses. 

The increase in bills has been anticipated for some time, as a volatile international market saw prices rises, however the cap forecast has risen in recent weeks as the combination of colder weather and reduced renewables production saw gas storage levels fall across Europe, resulting in wholesale prices rising increasingly sharply.

Uncertainty over the outlook for the April cap and beyond is also being compounded by a number of Ofgem consultations on its future structure Looking ahead, the announcement of talks between Russian and American officials aimed at ending the Ukraine conflict have seen gas prices fall, and while this has come too late to affect the April cap, the effects are being seen from July 2025 onwards, with prices expected to fall slightly in the third quarter of the year, before rising again in October.

The Consumer Price Index report is due to be released by the Office for National Statistics on 19 February, with prices predicted to rise. The increase in energy bills over the past two quarters has already exerted pressure on inflation, and – as stated by the Bank of England’s Monetary Policy Committee earlier this month – any further hikes in energy costs could drive inflation higher in the coming months.

The government’s emphasis on expanding renewable energy capacity is expected to reduce energy bills in the long run by replacing expensive fossil fuels with more affordable sustainable energy and decreasing our dependence on the volatile international wholesale market. However, this transition will take time, funding, and market reforms, meaning it could be years before households see a decrease in energy costs.

The government must consider short- to medium-term measures to protect consumers from the increase in bills. Whether this includes introducing social tariffs to support the most vulnerable, investing further in housing energy efficiency, or even providing one-off payments, support for households over the next year is going to be crucial.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said “Households have been hit hard over the past few months, and with bills set to rise for a third consecutive time the pressure is not letting up. While we’re not seeing a return to the peak of the energy crisis, the market is more volatile than it has been in quite some time, and households are bearing the brunt of cold weather and low gas storage levels across Europe.

“It might be tempting to look at rising bills and conclude that the push towards renewables is not working, and we should scale back on the transition. But the reality is higher energy costs only reinforce the need to accelerate our expansion of clean, reliable energy across the UK. While building out renewables requires market reform, as well as investment and time, the alternative is to be left forever at the whim of the volatile international wholesale market, which as recent years have shown, can be a pretty expensive place to be.

“It is clear, sticking with the status quo is simply not an option if we want to see long-term, sustainable bill reductions. That will mean ramping up investment in renewables, alongside continued reform of the electricity market, to ensure households reap the full benefits from the transition.

“That said, the government does have options to protect consumers while we are on the renewable energy journey. Short-term measures, from social tariffs to one-off payments, will be crucial to ensure that the most vulnerable are protected and that the burden of rising costs does not fall disproportionately on those least able to afford it.”

Richard Neudegg, Director of Regulation at Uswitch.com said “Households that haven’t fixed the past year are facing a hat-trick of hurt, with the energy price cap, which standard tariffs follow, predicted to rise in April, having also gone up in October and January.

“April’s energy rates are predicted to be 5% higher than today for the majority of homes that haven’t yet taken a fixed deal. Based on this hike alone, if households don’t take action they could pay around £85 more per year on their energy bills.”