Household energy bills are set to soar to a record £2,000 a year, threatening Boris Johnson with a cost-of-living crisis while taxes rise.
The price cap – easing the pain for families – may need to be raised by more than 50 percent in April, experts warn because of unprecedented wholesale costs.
The energy regulator authorized suppliers to increase bills by 12 per cent to £1,277 a year for a typical household at standard tariffs from October.
Another announcement of a second April surge is due in February, with a surge already inevitable to pay for the collapse of more than two dozen UK energy companies in recent months.
“As wholesale prices for commodities remain high, we suggest the tariff ceiling could rise by 56 per cent to £2,000 [a year] for the summer of 2022,” said Martin Young, an analyst at investment bank Investec.
Higher wholesale costs would account for £560 of the increase and supplier defaults would account for a further £72 per household, he said The times.
The increase would “come as a shock to many, with implications for discretionary spending, inflation and fuel poverty,” Young added.
It’s expected to arrive at the worst moment for the beleaguered prime minister, the same month that big county tax hikes and his Social Security rise to pay higher health and care spending.
Inflation is expected to hit 6 per cent next year, far outpacing wage increases and leaving workers worse off – despite his misleading boast that Brexit will boost wage packages.
The following month could also be crucial in determining whether Mr Johnson faces a leadership challenge from disaffected Tory MPs, many of whom have focused on feared losses in May’s local elections.
There were similar forecasts for the rising price cap after April. Economic analysts Cornwall Insight forecast £1,925 a year, while Citizens Advice said bills could rise to £1,891.
Cold weather and low gas exports from Russia have been blamed for sending wholesale gas and electricity prices across Europe to new highs in recent days.
According to Icis, the price reporting agency, UK gas prices rose 8 per cent to close on Monday night at an all-time high of 370.25p per spa – more than seven times the typical price over the past decade.
The failure of more than two dozen UK energy companies has resulted in billions of pounds in costs that are expected to be recovered from energy bills.
The price cap was introduced in 2019 to protect customers from “rip-off” prices and is updated twice a year by Ofgem, the regulator.
It caps bills for 11 million households on standard tariffs and four million households with prepayment meters.