Energy price cap predicted to rise to £1,660

If the predictions from the energy market analysis firm come to pass, this would see prices climb to approximately £1,660. Its forecasting also suggests that prices could go up to £1,663 by the winter of 2022.

Commenting on the news, Dr Craig Lowrey, a senior consultant at Cornwall Insight, said: “These figures reflect material increases in the period since our most recent default tariff cap forecast.

“With wholesale gas and electricity prices continuing to reach new records, successive supplier exits during September 2021 and new level for the default tariff cap (£1,277 for a typical dual fuel direct debit customer) for winter 2021-22, the GB energy market remains on edge for fresh volatility and further consolidation.

“Despite the record levels seen in the wholesale market which are contributing to the forecast increases in the default tariff cap, additional costs resulting from the succession of supplier exits risks contributing to even higher costs - these being charges under the Supplier of Last Resort (SOLR) scheme and industry support schemes for which the former suppliers were liable.

“Although the price cap methodology is structured to accommodate both outcomes, the extent to which they will be relied upon means that the impact on all consumers - not just domestic ones - could be felt in 2023.”

Over the past few weeks, nine energy suppliers have gone out of business - the latest being ENSTROGA, Igloo Energy and Symbio Energy. Through Ofgem’s SOLR scheme, E.ON Next will be taking on the combined 233,000 customers from these three companies.

According to Lowrey, due to the speed and frequency of exits under the SOLR process, details of the relevant administrator’s proposals have not yet been published. He added: “However, we note that use of the SOLR process since January 2018 has resulted in eight claims totalling approximately £56m, with several acquiring suppliers using the scheme to recover a proportion of customer credit balances.

“Therefore, with supplier exits since the start of August already into double figures, the prospect of further claims - and additional costs for consumers - is apparent, although when these costs will reach bills is unclear.

“Additional costs must also be met due to the failed suppliers not having paid their charges from mandatory industry schemes, namely the low carbon generation support mechanisms of the renewables obligation and feed-in tariff.

“Although our estimates of the cap for summer 2022 and winter 2022-23 exclude such effects given the extent of the uncertainty surrounding them, it is apparent that these costs will ultimately be borne by the industry as a whole and by customers in particular.”

Due to the continued distribution of the UK’s energy market, the price cap has gone up - going from £1,138 to £1,277 at the start of October. The increase has been driven by a more than 50% rise in energy costs over the last six months with gas prices hitting record highs.

In response to Cornwall Insight’s analysis, a spokesperson from Ofgem, said: “Ofgem’s number one priority is to protect customers. We know this is a worrying time for many people.

“The energy price cap covers around 15 million households and will ensure that consumers don’t pay more than is absolutely necessary this winter. However if global gas prices remain high, then when we update the price cap unfortunately the level would increase.”

The current state of the energy market will be high on the agenda at this year’s Utilities and Telecoms Conference, sponsored by Just - taking place on 24 November at The Midland in Manchester. To find more information about the event, click here.