Energy price HIKE warning: Ofgem cap could reach over £3,000 with more rises on cards

THE ENERGY price cap is likely to reach a staggering £3,000 by October if the situation in Ukraine worsens, with the door left open for potential emergency hikes to come more frequently.

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The energy price cap is already rising by just over 50 percent in April to reflect the rising wholesale costs which saw large numbers of energy firms leave the market least year. However this increase was calculated before energy prices were further pushed up by the conflict between Russia and Ukraine. “They’re not going down, they’re going up again aren’t they” said CEO of Good Energy Nigel Pocklington, “that will mean that subsequent cap announcements may well leap again”. Speaking to Express.co.uk he explained current analysis suggested if prices continue at current levels the next price cap calculation could go over £3,000.

More worryingly changes to the price cap could potentially hit more frequently after regulator Ofgem opened the door to more changes coming faster than every six months.

While announcing April’s price cap change, the regulator said it was looking at measures including: “Enabling Ofgem to update the price cap more frequently than once every six months in exceptional circumstances to ensure that it still reflects the true cost of supplying energy.”

In its consultation documents Ofgem refers to moving to looking at either quarterly updates or every four months instead of the current six.

Mr Pocklington warned that if price volatility carried on, such as from Ukraine, the cap could end up moving quicker.

Express.co.uk has contacted Ofgem for further comment.

Energy prices

Heating bills are set to rise as Ofgem’s price cap gets reviewed again in October (Image: Getty)

Russia gas

The Russia Ukraine conflict is driving energy prices even higher (Image: Getty)

In the meantime if energy prices climb higher energy firms could be faced with wholesale prices which once again don’t reflect the price cap.

Mr Pocklington however predicted the UK would be unlikely to see the wave of bankrupt firms 2021 saw when almost half of all energy firms left the market.

He explained: “The remaining companies are now obviously running businesses that are pretty prudent in terms of their hedging and their buying of energy.

“The weakest firms or the firms with the shakiest foundations have frankly already gone, there’s been a bit of a clear out already.”

Energy prices had previously been thought to begin declining in spring this year after the record highs of the winter however with Russia representing such as major source of western energy demands the picture is now increasingly unclear for companies trying to plan their hedging strategies.

Ofgem

Ofgem are consulting on making changes to the price cap more frequently (Image: Getty)

Mr Pocklington explained: “If (price volatility) carries on being the case you won’t have pre-bought all of your power and the problem it causes is it becomes quite hard to land on a reasonable price for the month out or the quarter out or next winter.

“Do you sit it out for a bit expecting it to calm down a bit or do you think it can only get worse, we’re going to go now.”

For consumers a key question will be whether to try to find a fixed deal or continue on a variable tariff covered by the price cap.

So far staying on the price cap has often proved cheaper than fixed deals however the potential for future high price hikes such as in October could change this if they rise significantly higher than current fixed deals.

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People's Energy

Over 30 firms such as People’s Energy went bust last year (Image: Getty)

Mr Pocklington predicted: “It does look as if we are entering a period of a number of years of higher energy prices, having had a pretty benign environment really through the first year of the pandemic.

“And I say that because leaving aside Russia-Ukraine, you’ve already got the fundamentals around the global economy restarting and significant demands for energy.

“You have, particularly in China, a high demand for gas which is a fuel in high demand but relatively short supply… you’re then exacerbating by the fact one of the world’s biggest exporters of gas is Russia and if you’re going to start switching that off you’ve got to figure out where else the supply is going to come from.”

“So I do think that the fundamentals would suggest that we’re entering a period of much higher energy prices for a couple of years.”

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