Energy bills could hit £4,400 in January, new analysis has found, after the energy regulator changed its price cap methodology.
In an interim forecast, energy consultancy Auxilione predicted the price cap on energy bills could reach £3,687 in October, almost double today’s record levels. This is higher than consultancy Cornwall Insight’s forecast of £3,358 and bank Investec’s prediction that bills would reach £3,523.
Auxilione also warned that the price cap could rise further to £4,400 in January, possibly reaching £4,700 in April. That would mean the price cap is more than four times higher than before the gas price crisis began last year. However, the consultants noted that the forecasts so far were less likely to be reliable.
Auxilione said the changes were largely due to new Ofgem rules announced earlier this week.
On Thursday, energy regulator Ofgem confirmed changes to its price cap methodology which meant the cap would change every three months instead of every six.
The wholesale energy market is moving so quickly that suppliers are scrambling to buy energy, creating a market structure known as a “flip”, when future prices are cheaper than current prices.
Ofgem is considering a bonus so that suppliers can recoup the costs of the delay, but current prices are so high that it is feared that many suppliers could go under before they have the chance.
To avoid a repeat of last year’s crisis when a wave of energy companies collapsed, Ofgem is halving the deadline for suppliers to recover energy supply costs. But as Auxilione’s figures suggest, that could mean the consumer ends up paying more.
Auxilione’s Tony Jordan said: “Market volatility is seriously hurting suppliers, so the regulator is trying to prevent more companies from collapsing, but unfortunately the consequence is that the consumer bears the cost.”
Energy bills may not drop until July, said Auxilione, when the price cap could drop to £4,000. However, it is still double the current level.