Cornwall Insight’s modelling for the Default Tariff Cap has shown extreme volatility in the market, with Winter cap predictions jumping by over £200 from Wednesday to Thursday – only to fall again on Friday before rebounding on Monday.
Despite the fall, predictions still show a winter cap increase of nearly £500 on the already high prices due to hit customers in April, with average annual bills predicted to be around £2,500 from October.
The invasion of Ukraine by Russia was the reason behind Friday’s jump in the cap predictions, with the tragic events unfolding in the country likely to continue to impact the cost of energy across Europe.
While the UK gets less than 4% of its gas from Russia, and is unlikely to have direct issues with supply, the reliance of much of Europe on Russian gas, means any price impacts will be felt across the entire European gas market.
Figure 1: Cornwall Insight default tariff cap forecasts
| Assess | Default tariff cap forecast, Winter 2022-23 (£/annum, typical dual fuel customer) | Daily % change | Default tariff cap forecast, Summer 2023 (£/annum, typical dual fuel customer) | Daily % change |
| Wednesday 23rd February 2022 | £2,521 | – | £2,043 | – |
| Thursday 24th February 2022 | £2,740 | +8.70% | £2,127 | +4.1% |
| Friday 25th February 2022 | £2,452 | -10.50% | £1,979 | -7.0% |
| Monday 28th February 2022 | £2,497 | +1.84% | £1,978 | -0.0% |
Source: Cornwall Insight
Dr Craig Lowrey, Senior Consultant at Cornwall Insight said:
“The tragic events currently unfolding in the Ukraine have had a deep effect on all of us, and it is essential that we keep the human impact of this conflict at the forefront of our minds. Our commentary is by no means to distract from the heart-breaking consequences of these events, but it is however sadly inevitable that the conflict will have wide ranging implications for all of Europe, not least on the supply of energy to the continent.
“The heavy reliance on gas imports across Europe and in the UK has left energy prices increasingly vulnerable to unstable international geopolitical and economic situations. With the potential supply disruption from Russia reverberating throughout the European energy Market, volatile energy prices are likely to continue for the foreseeable future.
“While in the past the UK has attempted to shield consumers from global market price rises through the Default Price Cap, these unprecedented events will make setting a fair rate for suppliers and consumers even more challenging, with our predicted winter price cap rate changing by over £200 from one day to the next.
“While questions are predictably turning to how we stabilise the energy market, with countries around Europe looking to rebalance their import rates and diversify the energy they use, it is clear, that in the short-term energy prices will continue in their upward trajectory. To mitigate the impact of rises on consumers and the wider economy, the UK government may need to reassess the level and scale of its financial support to households.”
–Ends
Notes to Editors
For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com
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About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
