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Chart of the Week

2021

Default tariff cap set to rise by at least £100 for coming winter

Craig Lowrey Senior Consultant

The default tariff price cap for a typical dual fuel direct debit customer looks set to increase by over £100 for the Winter 2021-22 period, according to an initial assessment from Cornwall Insight’s bi-annual tariff cap predictor. The latest forecast for the cap indicates that it will increase to around £1,250 for the coming season, which would represent the second successive seasonal increase in the cap following the rise recorded for Summer 2021 that saw an increase to £1,138.  The primary reason for the expected increase comes from the wholesale market, where prices have seen a considerable rise to reach some of the highest levels seen since the extreme weather conditions caused by the “Beast from the East” in early 2018. Underlying commodity prices have risen, so, too, has the EU ETS carbon price reaching a high of €50 per tonne of carbon and more than doubling over the past year.  On top of this, natural gas prices have risen considerably due to a cold winter across Europe and low levels of gas in storage facilities. The rising carbon, oil and LNG prices have further supported this increase in underlying gas prices. More generally, we are experiencing tighter power supply margins than last winter due to unforeseen and prolonged outages of several ageing fossil fuel and nuclear plants. Competitive tariffs are priced around £250 below the level of the cap. With a substantial increase in the wholesale price, it is extremely likely to expect this to ...

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