Cornwall Insight comments on the announcement of the October price cap

If you are a consumer seeking support with their energy bills, please read our blog here: https://www.cornwall-insight.com/support-for-consumers-concerned-about-rising-energy-bills/

The rise in the Default Tariff Cap (price cap) was unfortunately inevitable, as UK bills continue to be the victim of an unstable and unpredictable global market. While there is still some time until the January and April caps are set, the energy crisis is showing no sign of abating.

With every unprecedent rise in bills comes the need for greater reflection on the cap’s purpose and continued place in the energy market. Throughout the energy crisis, the government and Ofgem have remained committed to the cap, and in its ability to shield consumers from a volatile energy market. However, the cap was never meant to be a permanent solution, it was created for a different energy market than the one we face today and has not protected consumers from what will be incredible hardship this winter. We urge, as we have done previously, for the cap to be reviewed and mechanisms for protecting the most vulnerable, such as social tariffs, to be considered as viable alternatives.

In the meantime, a key focus for the next Prime Minister and for Ofgem must be protecting consumers, and the wider economy from the impact of this rise. There are several avenues that can be explored including a review and expansion of the current support package of at least £400 per household.

However, all of these are temporary solutions and must be accompanied by a focus on implementing a viable long-term solution.

Today should be seen as a wake-up call to policy makers that short-term thinking and triage of the energy system is not enough. Without real change to the energy system in this country it is consumers, suppliers and the economy that will all continue to suffer the consequences.

For more information on our price cap forecasts please find our explainer piece on the website: What is the price cap?

Figure 1: Cornwall Insight’s default tariff cap forecasts, £ per year including VAT (dual fuel, direct debit customer, national average figures)

£/annumQ123 ForecastQ223 ForecastQ323 ForecastQ423 Forecast
Wholesale£4,149.99£5,318.16£4,658.84£4,693.99
Adj. Allowance£47.42£47.42£47.42£0.00
Policy Costs£151.52£162.51£162.51£166.84
Network Costs£371.70£311.32£311.32£311.32
Operating Costs£244.74£257.39£254.41£253.33
EBIT£96.17£118.08£105.26£105.08
Headroom£68.66£86.43£76.55£76.41
SoLR Recovery£0.00£0.00£0.00£0.00
VAT£256.51£315.07£280.82£280.35
Total inc. 5% VAT£5,386.71£6,616.37£5,897.12£5,887.31

Source: Cornwall Insight

Figure 2: Cornwall Insight’s default tariff cap forecasts split by gas and electricity, £ per year including VAT (dual fuel, direct debit customer, national average figures)

QUARTERLYQ1 2023 CI ForecastQ2 2023 CI ForecastQ3 2023 CI ForecastQ4 2023 CI Forecast
Electricity£2,505.14£2,834.19£2,445.11£2,464.99
Gas£2,881.57£3,782.19£3,452.01£3,422.32
TOTAL£5,386.71£6,616.37£5,897.12£5,887.31

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