The energy price cap will remain above £3,500 a year throughout most of 2023, according to the latest dire forecast for household bills.
The prediction, from energy consultancy Cornwall Insight, comes as families gear up for what is set to be the toughest winter for decades amid mounting costs on almost every front as inflation hits levels not seen for 40 years.
The cost of living crisis – caused initially by demand exceeding supply as economies got back in gear after COVID restrictions – gathered pace in April when the price cap rose by more than 50% to £1,971
People turning to value meals – cost of living latest.
Energy-driven inflation stepped up a gear, to rampage across the global supply chain, since Russia’s war in Ukraine began as a raft of commodities, including natural gas, surged in price.
It is rising wholesale gas prices that account for the bulk of the energy bill pain.
Cornwall Insight said on Wednesday, shortly after BP revealed bumper profits for the last quarter of its financial year, that household energy bills were likely to remain at more than two-and-a-half times their pre-crisis levels until at least 2024.
It predicted that average bills would hit £3,359 per year from October and continue to rise until peaking at £3,729 from April 2023.
It will begin to fall after that, but only slowly, reaching £3,569 from July before hitting £3,470 for the last three months of 2023.
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Energy bills could rise to £4k
The consultancy explained that the forecasts were based on market trends that have proved more dire recently over fears Russia will switch off the taps to Germany via the Nord Stream 1 pipeline in retaliation for Western sanctions against Moscow.
It is currently pumping at just 20% of capacity, bolstering concerns across Europe that a supply crunch will lead to a squeeze over the winter months of high demand and ultimately force Russia-dependent economies into recession.
EU nations are currently tied by a voluntary agreement to save gas by 15% to help preserve stocks.
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Gas prices soar in Germany
The scramble for alternative supplies on the continent is inevitably affecting the wholesale cost in the UK, despite the country relying on Russia for less than 5% of its annual gas supplies.
UK wholesale costs have been around 30% lower than those being demanded elsewhere in northern Europe, but that gap is expected to decline as the darker evenings draw in.
A recent report by National Grid saw little chance of the lights going out in the UK this winter.
However, experts have warned that a major cold weather event could force measures, such as peak demand non-critical factory shutdowns, to ensure homes can stay warm.
Craig Lowrey, principal consultant at Cornwall Insight, said: “We have less than a month until the new price cap is announced and given the trends in the wholesale market and the concerns over Russian supply, unfortunately the only change to the prediction is likely to be up.
“While the rise in forecasts for October and January is a pressing concern, it is not only the level but the duration of the rises that makes these new forecasts so devastating.
“While the government has pledged some support for October’s energy rise, our cap forecast has increased by over £500 since the funding was proposed, and the truth is the £400 pledged will only scratch the surface of this problem.”
The support package rises to £1,200 for the poorest households.
The issue has become a key battleground in the Tory leadership race as either Rishi Sunak, the former chancellor who signed off the measures, or Liz Truss will be prime minister ahead of the expected surge in October’s price cap level.
The charity National Energy Action predicted last month that 8.2 million UK households, or one in three, will be in fuel poverty should the average bill reach £3,250 per year.