Energy prices forecast to rise by 9% in October

Energy prices are expected to rise by 9% in October according to consultancy Cornwall Insight.

The data shows that for a typical dual fuel household we predict the October price cap to be £1,714 per annum. This is a rise of 9% from the current price cap which was set at £1,568 per year for a typical consumer. 

Looking further ahead, we currently forecast the cap will show a further modest increase in January 2025. However, recent tensions in the Russia-Ukraine war could see prices rise further at the start of the new year.

Over the past few months gas and electricity wholesale prices have rebounded, from their 30-month lows in February. The rise in wholesale market prices, particularly since the start of August, has been the key driver behind the forecast uptick in bills.

While prices have stabilised somewhat compared to the previous two years, the market has not fully recovered from the energy crisis and the impact of Russia’s invasion of Ukraine. As a result, the market remains highly sensitive to any global events that could disrupt supply. The UK’s reliance on imported energy leaves the country very vulnerable to this global volatility. This is seeing both household and business energy bills forecast to staying far above pre-crisis levels.

It is essential that the vulnerable are protected from rising energy bills in the short-term, this could involve the introduction of social tariffs, revising benefits, or adjusting the price cap mechanism. Ofgem is currently undergoing a comprehensive review of the price cap with potential changes to elements such as the standing charge expected over the coming year.

In the longer-term, a shift towards sustainable, home-generated energy will be necessary to reduce the UK’s vulnerability to international shocks. There have been some positive signals from the government, such as increasing the budget for the renewables auction and lifting the de facto ban on onshore wind. However, much more progress is needed.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said  “This is not the news households want to hear when moving into the colder months. Following two consecutive falls in the cap, I’m sure many hoped we were on a steady path back to pre-crisis prices. However, the lingering impact of the energy crisis, has left us with a market that’s still highly volatile and quick to react to any bad news on the supply front.

“Despite this, while we don’t expect a return to the extreme prices of recent years, it’s unlikely that bills will return to what was once considered normal. Without significant intervention, this may well be the new normal.

“The government will need to adopt a two-pronged approach to tackle rising energy bills. Immediate action is needed to ease the financial burden on households – such as the introduction of social tariffs, or reform of the price cap – but that’s only part of the solution. We must also develop a long-term strategy to secure our energy future. This means a fundamental overhaul of our energy system, with a strong emphasis on increasing domestic energy production. Simply waiting for prices to drop on their own isn’t an option, we need a proactive and forward-thinking approach to ensure long lasting energy affordability and security.”

Richard Neudegg, Director of Regulation at Uswitch.com, said “This prediction compounds the worry that energy bills are going to rise just as we reach the season to switch the heating back on.

“A predicted 9% rise in energy costs would add £146 a year to the energy bills of the average household on a standard variable tariff. The price cap is expected to rise again in January, but bill payers can take action now to lock in certainty on how much they pay.”