July Household Energy Bills to Rise 12%, Less Than Expected

Analysts now expect the household energy price cap to rise less than first feared when updated in July. Cornwall Insight forecasts the cap at £1,837 for a typical dual fuel household for July to September.

Household energy bills in July are forecast to rise by 12%, a smaller increase than earlier feared. That equates to roughly a £196 annual increase compared with April’s cap.

Forecast details

In early March Cornwall Insight had warned bills could jump by £332 to £1,973 from July. The revised, lower estimate reflects some easing in wholesale prices after the initial post-outbreak spikes.

Key figures are summarised below to show how estimates have shifted. These numbers underline the scale of recent market moves.

Market drivers

Price volatility followed the outbreak of the Iran war on February 28. Disruptions in the Strait of Hormuz and attacks on regional energy infrastructure pushed oil and gas prices higher.

At one stage crude traded near $120 per barrel. The Strait of Hormuz carries about a fifth of the world’s seaborne oil and gas.

Policy response

Ofgem will announce the next price cap level by May 27. The regulator had reduced the annual cap to £1,641 for April to June earlier this year.

That cut reflected a government pledge to reduce bills by roughly £150 through removing green subsidies. The government is planning targeted support and has extended electricity bill help to 10,000 firms.

Outlook

Wholesale costs are unlikely to return to pre-war levels until shipping through the Strait of Hormuz resumes fully. Cornwall Insight said a July cap rise looks effectively unavoidable given locked-in wholesale prices.

Filmogaz.com will monitor developments and report when Ofgem confirms the cap on May 27. Consumers and businesses should prepare for higher bills when the cap is updated.