Cornwall Insight updated its forecast for the default tariff cap on 8 July 2022, putting the October 2022 cap at £3,245 and the January 2023 cap at £3,634, an average of £3,3041. The previous forecast, published in June 2022, had put the two caps at £2,981 and £3,003, an average of £2,9921.
The same analysis, by the Energy and Climate Intelligence Unit (ECIU), attributes the rise overwhelmingly to wholesale gas. It states that gas will have added £2,000 to the average bill, or over 90% of the increase, with wholesale gas costs adding around £1,200 to gas bills, an increase of over 500% from before the crisis, and gas pushing up electricity wholesale costs by over £700 a year, an almost 400% increase1. It also attributes around a further £100 to the £2.7bn collapse of over thirty energy suppliers, not including the £1.9bn taxpayer bill for Bulb Energy's special administration1.
The ECIU analysis compares these figures with an average dual fuel price cap bill of around £1,100 for the period January 2019 to September 20211. It notes that future price caps will last for three months each, as opposed to six months to date, and that averages were taken for the six months of October 2022 to March 20231. It adds that VAT at 5% would add just over £100 compared with average pre-crisis levels, and that levies funding insulation for low-income households and early renewables projects are set to remain stable into the winter at around £1551.
On energy efficiency, the ECIU analysis states that the ECO insulation scheme is knocking £600 off the bills of fuel poor households, and that schemes such as ECO have contributed to savings of £1.2bn per year under current prices1. Dr Simon Cran-McGreehin, Head of Analysis at ECIU, said:
"The ECO insulation scheme has worked well and is knocking £600 off the bills of fuel poor households, but government is non-committal on doing more."
The ECIU analysis also states that new renewables are set to pay back £1.3bn up to next spring via Contracts for Difference, and that recent government auctions secured a further 11GW of wind and solar capacity at a quarter of the price of gas power generation, including 7GW of offshore wind at £45/MWh in 2021 prices1. It says hitting the 50GW by 2030 target would take savings to £34bn per year in the event of a future gas crisis, equivalent to £500 per household1.
Separately, Ofgem's chief executive Jonathan Brearley told MPs that Ofgem expects the cap for October to December to rise by more than the £800, to reach £2,800, previously predicted1. That figure is below the Cornwall Insight forecast. The ECIU analysis says the acknowledgment came days after industry experts raised their forecast to £3,300 a year, from £3,000 a few weeks previously1.
Why it matters for households
The forecast average of £3,304 covers two caps, not one bill: £3,245 for October 2022 and £3,634 for January 20231. Because future caps run for three months rather than six, a household's actual annual cost depends on how the cap moves at each quarterly announcement, and the average is taken across the six months from October 2022 to March 20231. The ECIU analysis puts over 90% of the rise on wholesale gas costs, meaning the level of a household's exposure to gas, through a gas boiler, a gas hob or the gas share of electricity generation, is the main variable in what it pays1. The same analysis states that insulation schemes have already reduced bills for fuel poor households and that renewables are paying money back through CfDs, both of which act against the wholesale gas trend1. The price cap history sets out how each level has been announced, and the energy bills and the price cap guide explains how the cap translates into a household bill.
What happens next
The October 2022 cap level is due to be announced by Ofgem, with the January 2023 level following later; the ECIU analysis notes that future caps will last three months each1. Ofgem's own expectation, given to MPs, is a rise of more than £800 to £2,800 for October to December, which is lower than the Cornwall Insight forecast of £3,2451. No further announcement dates are given in the sources.