As the latest reduction in the energy price cap takes effect, households are being warned of a significant increase in bills ahead due to higher wholesale gas prices.
The cap, limiting what suppliers can charge per unit of energy, dropped by 7% overnight following the latest three-month review by industry regulator Ofgem.
This reduction means typical 12-month bills will be around £500 cheaper than a year ago, leaving the average bill at £1,568 until the next review in October.
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However, a report by the Energy & Climate Intelligence Unit (ECIU) indicated that consumers should brace for an additional hit of up to £600 this winter, largely due to rising wholesale prices. The report suggested a possible £200 price cap hike from October, potentially keeping the total at that level until June.
Experts at Cornwall Insight predicted a 10%, or £155, increase from 1 October to £1,723 annually, though uncertainty remains about the market’s path. Consumer groups highlight the availability of fixed-rate deals as an alternative to the price cap, following a period of limited competition.
European wholesale costs are elevated, with strong competition from Asia, especially China, for liquefied natural gas (LNG) replacing some Russian natural gas volumes lost after the Ukraine invasion in February 2022. The EU’s planned extension of sanctions against Russia, targeting LNG exports, may further pressure supply across Europe.
UK household costs for gas and electricity averaged just below £1,090 before the Russia-Ukraine war. The ECIU report stated that by September 2025, the average household could have paid an extra £2,600 on energy bills due to the ongoing gas crisis, with government spending an additional £1,400 per home earlier in the crisis.
Dr. Simon Cran-McGreehin, head of analysis at ECIU, emphasized the UK’s high dependence on gas for electricity and heating, costing bill payers £2,000 during the gas crisis and the economy tens of billions of pounds.
He advocated for investing in home insulation, switching to electric heat pumps, and fast-tracking renewables to reduce vulnerability to international gas markets.
Emily Seymour, the editor of Which? Energy, noted that consumers would be relieved by the £122 reduction in the price cap starting 1 July. She advised consumers to compare monthly payments on the price cap to fixed deals and consider fixing deals close to the July price cap, not longer than 12 months, and without significant exit fees, given the predicted rise in October.
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