Soaring price cap means energy bills are set to treble this winter to around £500 a month – and over £700 in January alone 26 August 2022 Ofgem’s announcement today (Friday) that the energy price cap is set to increase from £1,971 to £3,549 this October, and is likely to rise further in January, means that monthly energy bills could be three times higher this winter than last year, at around £500 a month, according to new Resolution Foundation analysis. The analysis, which incorporates both Ofgem’s confirmed price cap for October (£3,549) and Cornwall Insight’s latest price cap forecast for January (£5,386.71), shows that energy bills this year (2022-23) are set to be around £2,277 higher than last year at £3,749 – extra money that families simply can’t afford. And with 80 per cent of domestic gas demand taking place between October and March, typical energy costs over this period will be three times higher than they were last winter at around £500 a month. The UK’s four million customers on pre-payment meters, who tend to have lower incomes than those on direct debits, face the biggest challenge as they can’t smooth their bills over the year. Typical energy bills in January alone could hit £714 – over half of their monthly disposable income. The Foundation says that even with the targeted payments and the universal £400 rebate already committed, a winter catastrophe is coming unless extra support is provided, with families forced to turn off their heating, or fall behind on bills and run up arrears. As well as being significant in scale, further support with energy bills needs to: target those who need help most; reflect households’ differing levels of energy usage; and, stretch beyond the benefit system to reach all low-to-middle income households. Currently, none of the proposals from leadership candidates or opposition parties pass these tests. The Foundation says that the options available to the new PM include an innovative social tariff – offering a 30 per cent reduction in bills to all low-to-middle income households – or a universal bill reduction, part-funded by solidary taxes on better-off households and windfall taxes on energy producers. Torsten Bell, Chief Executive of the Resolution Foundation, said: “A price cap of £3,549 from October, with another rise likely in January, means that Britain is on course for a winter catastrophe unless significant help is provided. “Winter energy bills are set to average around £500 a month, while pre-payment customers will need to find over £700, more than half their disposable income, to keep the heating on in January alone. These costs pose a serious threat to families’ physical and financial health. “The benefits system has a crucial role to play this winter, but the scale of the crisis means that combining this with more radical approaches now looks all but inevitable. Big bill reductions combined with solidarity taxes, or throwing the kitchen sink at a brand-new social tariff scheme, should be the focus for whoever becomes the next Prime Minister.” Notes to Editors Cornwall Insight’s latest price cap forecast is available here.
