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The price cap that dictates the typical British household energy bill is expected to climb by 20 per cent in July compared with the previous quarter, largely due to the rise in wholesale prices in gas and electricity triggered by the Iran war, according to fresh forecasts.
Cornwall Insight, a consultancy, said on Friday that it expects the price cap on energy bills during July to September to be set at a level that would see typical households pay £1,973 per year, or £332 more than the level between April and June.
That level, which could still change significantly depending on how wholesale prices evolve, would mark the highest price cap since July 2023 at the tail-end of the energy crisis connected to Russia’s invasion of Ukraine in February 2022.
The forecasts are a challenge for the Labour government which has pledged to bring energy bills down but is being accused by political opponents of doing the opposite.
They are also likely to add to pressure on ministers to do more to shield consumers.
The price cap sets a limit on how much energy companies can charge households on standard default tariffs for each unit of energy used and the standing charge, rather than the total bill.
Households typically use less energy during the summer as they are not having to heat their homes, so the effects of an increase in July will be muted. Cornwall Insight expects the increase to be felt mainly in the unit price of gas, but electricity will also rise compared to the previous quarter.
Nonetheless, the government is facing pressure to step in, particularly if the high costs persist into winter as many analysts now expect.
Chancellor Rachel Reeves has said “nothing is off the table” regarding intervention to help households, but the government is unlikely to be able to afford the blanket support to households introduced during the Russia-Ukraine crisis. It could instead bring in measures targeted at vulnerable households.
Even before the Middle East crisis began, the government had taken steps to cut energy bills by moving some renewable energy subsidy costs into taxation and ending an energy-efficiency scheme.
Wholesale gas prices have more than doubled since Israel and the US attacked Iran on February 28, due to the closure of the Strait of Hormuz through which about 20 per cent of global liquefied natural gas is normally shipped.
The increases will not feed through into bills immediately: the price cap for the April to June period is due to fall by about 7 per cent to £1,641 per year compared with current levels based on wholesale prices before the war began and the government’s intervention.