Pressure is mounting on the government to announce a new support package for struggling households as energy bills are now expected to top £4,200 from January.
Consultancy Cornwall Insight said on Tuesday it expected the energy price cap to reach £4,266 a year in the first three months of next year.
The consultancy predicts bills could reach £4,426 in the second quarter of next year before tapering off. Just a week ago, Cornwall Insight predicted that the energy price cap was on track to rise to £3,615 a year from January.
Sign up for the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
Cornwall Insight said rising wholesale prices and a review of the methodology used by regulator Ofgem to calculate the price cap were behind the rise in its forecasts.
The consultancy’s lead consultant, Dr Craig Lowrey, said: “It is essential that the government uses our predictions to drive a review of the support package on offer to consumers.”
The consultancy now expects the cap to reach £3,582 from October, up £200 on its last forecast. Bills are expected to start to ease next summer, to £3,810 in the third quarter and then £3,781 in the final three months of next year.
The cap, which is set quarterly by energy industry regulator Ofgem, was £1,400 a year as recently as October last year.
Former chancellor Rishi Sunak announced a £15 billion support package for consumers in May, including £400 for every household. However, rising wholesale prices have since threatened to wipe out the impact of that support and Sunak and his Conservative leadership rival, Liz Truss, are under pressure to announce further measures.
Lowrey said: “If £400 was not enough to affect the impact of our previous forecast, it is certainly not enough now.
“The government must make introducing more support in the first two quarters of 2023 a number one priority. In the longer term, a social charge or other support mechanism to target support to the most vulnerable in society are options that at Cornwall Insight we have previously proposed. Right now, the current price cap is not working for consumers, suppliers or the economy.”
Ofgem plans to adapt the formula used to calculate the price cap in October to allow suppliers to better manage the risk of volatile wholesale prices and avoid higher prices for consumers as a result of bankruptcy of suppliers.
The regulator is trying to prevent a repeat of last year’s events, when nearly 30 suppliers collapsed, partly due to rising wholesale energy prices.
Lowrey said the change in the formula had led to an increase in his predictions. However, he said the move would protect providers struggling with costs and prevent the cost of their collapses from being added to consumers’ bills.