Energy bills could spike to nearly £3,000 per year in the depths of winter, when energy demand will be at its highest, warned Cornwall Insight.
The energy specialist has hiked its price cap forecasts, estimating a default tariff of £2,879 per year for the average consumer in October, and £2,907 in January if Ofgem’s plans for a quarterly mechanism are finalised.
This follows renewed uncertainty across energy markets after the European Union (EU) finalised a ban on Russian oil, and after the country’s President Vladimir Putin signed into law demands for ‘unfriendly nations’ to purchase Russian gas in roubles – with the Kremlin cutting off supplies to multiple countries since then.
It also comes after warnings from Ofgem boss Jonathan Brearley to Parliament that the cap could rise to over £2,800 per year – which triggered Chancellor Rishi Sunak to announce a £15bn support package for households, providing vulnerable energy users savings of up to £1,200 per year.
As recently as last month, Cornwall Insight’s forecasts were around £2,600 per year – reflecting geopolitical volatility that is seeing forecasts wildly fluctuate.
If prices do close in on the £3,000 milestone, it will mean energy bills have risen by a 2.5 multitude over the past 12 months alone.
Looking further ahead, Cornwall Insight expects prices to remain elevated over 2023 – with a decline of only 10 per cent for the second and third quarter periods.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “While Russia provides only a very small percentage of UK gas supplies, the impact on the cap reflects the UK’s wider import reliance on EU and Norwegian gas flows.”
“If sanctions were to be applied by the EU to Russian gas supplies, any Russian shortfall would potentially imply that these nations may be able to export less gas to the UK than would otherwise be the case, which would in turn be reflected in both gas and electricity prices – the latter given the volume of gas-fired generation capacity on the system. “
He also called on the UK to reduce its reliance foreign energy through investment in green technologies and homegrown renewables, which Lowrey believed would eventually be reflected in energy bills.