As the energy market continues to grapple with global political and economic uncertainty, the corresponding high wholesale prices, and the UK’s continued reliance on energy imports has once again seen predictions for the domestic consumer Default Tariff Cap rise to what are even more unaffordable levels.
New forecasts from Cornwall Insight have seen the Default Tariff Cap for Q1 2023 (Jan-Mar) rise to £3,363 a year for an average domestic consumer, increasing significantly from the £3,003 figure released two weeks ago. Predictions for the Q4 2022 (Oct-Dec) Cap, have also seen a steep increase, and now sit at £3,244 a year.
Figure 1: Cornwall Insight’s Default Tariff Cap forecasts
|QUARTERLY||Q4 2022 CI Forecast||Q1 2023 CI Forecast|
Source: Cornwall Insight
Ongoing uncertainty regarding Russian gas flows into continental Europe, as well as more recent concerns such as the halted strike by Norwegian gas workers, have led to an increasingly volatile energy market, driving the rise in wholesale energy prices – which ultimately trickles down to consumers.
There is always some hope that the market will stabilise and retreat in time for the setting of the January cap. However, with the announcement of the October cap only a month away, the high wholesale prices are already being “baked in” to the figure, with little hope of relief from the predicted high energy bills.
Ofgem are continually reviewing the cap and there are a raft of consultations and potential reforms which could impact these forecasts. However, as it stands, energy consumers are facing the prospect of a very expensive winter.