Energy bills to hit £4,266 in January after Ofgem changes price cap rules

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Energy bills for the average UK household are on course to surge to a devastating £4,266 a year in January, experts have warned.

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That will come after a rise to more than £3,500 in October as the cost-of-living crisis deepens throughout this year and into 2023, according to figures from Cornwall Insight, an energy consultancy.

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Ofgem is set to put the price cap at £4,266 for the average household in the three months from the beginning of January.

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Cornwall Insight said that this was around £650 more than its previous forecast, thanks to large rises in the wholesale cost of gas.

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It also expects a further increase in April next year to before prices finally drop slightly to £3,810 from July and £3,781 from October.

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It comes as Ofgem last week announced changes to how it will calculate the price cap on energy bills.

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"While our price cap forecasts have been steadily rising since the summer 2022 cap was set in April, an increase of over £650 in the January predictions comes as a fresh shock," said Craig Lowrey, principal consultant at Cornwall Insight.

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"The cost-of-living crisis was already top of the news agenda as more and more people face fuel poverty - this will only compound the concerns.

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"Many may consider the changes made by Ofgem to the hedging formula, which have contributed to the predicted increase in bills, to be unwise at a time when so many people are already struggling."

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Ofgem announced earlier this year it would calculate the cap every three months instead of every six after a string of suppliers went bust, in part because they were not allowed to pass on rising costs to customers.

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While Ofgem’s changes to its hedging formula have contributed to rising bills, the increase is largely down to the rise in wholesale energy prices, Cornwall said.

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Dr Lowrey said that the Government must take action to step in and protect households from spiralling costs.

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So far, the Government has promised £400 to every household, and extra help for the more vulnerable, but campaigners say this falls well short of what is required.

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"If the £400 was not enough to make a dent in the impact of our previous forecast, it most certainly is not enough now," Mr Lowrey said.