The Resolution Foundation has set out forecasts showing the energy price cap reaching £4,266 a year for a typical household from January 2023, against the £2,800 expected earlier in 20221. The same analysis, published on 15 August 2022, puts the cap at £3,582 a year from October 20221. The forecasts cited come from Cornwall Insight, which revised its figures after wholesale prices rose again and Ofgem changed the cap methodology1.
The foundation says a typical low-income household paying by Direct Debit will need an extra £418 over the first three months of 2023 compared with what was expected in May 20221. To afford that, households in the lowest income quintile would have to cut almost one pound in four (24 per cent) of non-essential spending, against one pound in twelve (8 per cent) for the richest tenth of households1. In May 2022 the Government had announced a £15 billion package of energy bill support1.
"energy bills in January-March 2023 are set to be an annualised £4,266, rather than the £2,800 expected earlier this year"
The analysis also sets out how what makes up an energy bill varies with the fabric of the home. Families in energy-inefficient homes face monthly gas bills £231 higher than those in equivalent homes already meeting the Government's efficiency target of EPC C, a penalty of £849 across the 2022-23 winter, or £141 a month1. Turning the gas heating on is put at £7.34 a day this winter even in an EPC C home, rising by 58 per cent to £11.60 a day in a badly insulated home1. Almost half (49 per cent) of the poorest fifth of households live in homes with uninsulated walls1.
| Measure | Figure |
|---|---|
| Cap from October 2022 | £3,582 a year |
| Cap from January 2023 | £4,266 a year |
| Earlier expectation for 2022 | £2,800 a year |
| Extra cost for a low-income household, January to March 2023 | £418 |
| Monthly gas bill penalty, energy-inefficient home | £231 |
| Winter 2022-23 penalty | £849 |
Why it matters for households
The cap figure is an annualised rate for a typical household, not a cap on what any one home pays, so a household using more than the typical amount pays more. The gap between the £2,800 assumed earlier in 2022 and the £4,266 now forecast is the measure of how far the outlook moved in a few months, and it lands in the quarter when almost half of annual household gas costs are incurred1. For a home's energy independence, the analysis points to two separate levers: the unit price, which a household cannot control, and the amount of heat a home loses, which is fixed by its insulation, glazing and walls. The foundation notes that gas unit prices are set to be four times their winter 2019 level by January 20231. It adds that had government support to insulate homes not been cut a decade ago, millions of families would be paying hundreds of pounds less this winter1.
What happens next
The foundation says the Government will need to act quickly to put support in place for winter 2022-23, and that helping the lowest-income households should remain the core priority1. It also calls for a drive to insulate the UK's homes and for cheaper energy from low cost renewables1. No decision by Ofgem or the Government on the January 2023 cap level is reported in the source; the £4,266 figure is a forecast1.
Sources1 cited
- Cutting back to keep warm • Resolution Foundation, resolutionfoundation.org