Energy bills likely to inch higher from April as gas costs climb again

Energy bills for most British households are expected to rise again this spring, as rising wholesale gas prices and escalating grid charges put renewed financial pressure on millions of households.

Forecasts from Cornwall Insight, the energy consultancy, suggest Ofgem’s maximum rate could rise by around 1 per cent to £1,762 a year for a typical dual-fuel household in April, reversing an earlier forecast of a modest fall. The new figure is slightly higher than the £1,738 cap that will come into effect from January and continues to increase significantly from pre-crisis averages of around £1,100 a year.

Other proposed adjustments to the price cap – such as allowances for energy-intensive industries – could add a further £20, bringing the total to £1,782 a year.

Gas prices in Europe have had a volatile year. After falling to 24 euros per megawatt-hour in February, it has rebounded near its one-year high of 45.5 euros per megawatt-hour. Demand from Asia, driven by extreme summer temperatures, has intensified global competition for liquefied natural gas, which Britain has increasingly relied on as it works to reduce its dependence on Russian pipeline supplies in the wake of the invasion of Ukraine.

Continued reliance on LNG imports is likely to keep gas markets volatile next year, UK energy regulator Ofgem has warned. Craig Lowry, principal consultant at Cornwall Insight, described the outlook for 2024 as “a perfect storm of regulatory changes and market disruption”, adding that “while significant rises in prices are currently unlikely, the degree of any increase will depend on how the market works”. Regulatory reforms are evolving.

The energy price cap, introduced in 2019, limits the price suppliers can charge per unit of gas and electricity. They are recalculated at regular intervals to reflect the effective resource costs. However, the result is that even at the current level, households face bills almost 50 percent higher than those seen before the energy crisis.

Consumer advocates remain concerned. Simon Francis, Coordinator of the Fuel Poverty Eradication Alliance, noted: “The latest forecasts suggest that households will pay around 70 per cent more than they did during the winter of 2020/21. This means an extra £750 a year, pushing more people into Living in cold, damp homes and risking the health effects of fuel poverty.

With gas prices rising in the wake of geopolitical tensions, including the conflict in Ukraine, Labor has proposed accelerating Britain’s shift towards renewable energy sources to reduce exposure to rising fossil fuel prices. According to research by think tank Ember, renewables are on track to provide more electricity to the UK grid than fossil fuels this year for the first time, providing a glimmer of long-term relief amid near-term cost pressures.