Energy bills could reach staggering '£3,200' in October as Ofgem warns of soaring prices

12 July 2022, 10:11

Experts have warned energy bills are likely to rise to over £3,200 in October, as the head of Ofgem admitted their previous prediction on spiralling energy costs was too low.

In May, the energy regulator predicted that the price cap would reach £2,800 when it is next changed in October.

However, experts last week warned the energy regulator's price cap was on track to leap by around £1,300, to over £3,200 a year, when the dreaded price cap review takes place.

The new energy price cap will come into force just after a new prime minister takes office at No10 on September 5.

Finance guru Martin Lewis said waiting until September to appoint a new PM is "too late" to deal with the "catastrophically high" price cap - which will be unveiled a fortnight before the new Conservative leader replaces Boris Johnson.

He said the rise, which is predicted to take a typical bill to £3,244 a year, will "cause panic" amongst the public, and the timetable for a new prime minister is "not enough time for ministers to act".

He added that the energy price cap is set to rise again in January to £500 per year more than when May's help package was announced.

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While head of Ofgem Jonathan Brearley refused to say if the cap could reach a figure of over £3,200 - as suggested by experts - he said energy prices appear higher than when Ofgem made its estimate.

He told MPs sitting on the Public Accounts Committee on Monday: "It's clear given the pricing dynamics we're seeing, given the ongoing impact of the Russian invasion of Ukraine, that there is positive pricing pressure there - as in prices are looking higher than they did when we made that estimate - but we don't give ongoing sort of commentary until we make our formal announcement."

When Sarah Olney, Lib Dem MP for Richmond Park, asked: "Imagine if it is in the region of £3,200, and that may or not be, but it's going to be higher.." he answered "yes" before she continued the question "...we know it's going to be higher than now..."

The energy price cap already ballooned by 54% in April, hitting £1,971 as gas prices soared from last summer following Russia's invasion of Ukraine.

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But since then, gas markets have remained tough for buyers. Last week experts at Cornwall Insight predicted that the cap could reach £3,244 per year from October, and then £3,363 per year between January and March.

The cap is calculated based on the price of gas and electricity on the wholesale market, setting what Ofgem believes is a fair price for suppliers to charge their customers.

However in the face of a European gas crisis, which has seen prices increase substantially, the price cap has gone up time and time again.