UK energy bills to soar towards £3,400 a year this winter, suggests research

UK households face a 65 per cent increase in their gas and electricity bills this winter to more than £3,200 a year, according to research that highlights the escalating cost of living crisis.

Energy consultancy Cornwall Insight said the energy price cap for the average home is now expected to reach £3,244 when it is revised by regulators in October, up from £1,971 in April. Cornwall predicted the price cap would rise further to £3,363 in January.

Morgan Wild, head of policy at Citizens Advice, said it would be “hugely worrying news for families . . . being pummelled from all sides by rising costs”, adding: “The government has stepped in with welcome support on energy bills, but . . . it must make sure money reaches those who need it most.”

The expected jump in prices comes after Russia last month slashed gas exports to Germany in apparent retaliation for western sanctions following its invasion of Ukraine. Gas prices, which feed into electricity costs as well as home heating, have almost doubled in the past month.

While the UK obtains only a relatively small portion of its gas directly from Russia, prices are closely linked to those on the European mainland as both markets are connected by pipelines, allowing gas to flow where it is most needed. It is highly reliant on imported gas, using the fuel to generate roughly a third of its electricity and to heat the vast majority of homes.

The government has already offered support to households in the form of a council tax rebate and a £15bn support package, which should add up to about £1,200 for the 8mn households on means-tested benefits.

But campaigners have indicated that more help will probably be needed given the scale of the increase, as government measures were decided back when ministers thought the average bill would rise to roughly £2,800 rather than close to £3,400.

How much help to offer households with surging energy bills is likely to be a key pillar of the contest to replace Boris Johnson as leader of the Conservative party and prime minister, after he announced his resignation this week.

Describing the expected increase as “absolutely horrifying”, the End Fuel Poverty Coalition called on candidates in the contest to “commit to further, short-term, financial support for people in fuel poverty this winter” and to “mitigate any further increases in the price cap” above £2,800.

For single-earner households on the average UK salary, energy bills at the level predicted by Cornwall Insight would absorb almost 15 per cent of take-home pay. In 2019, before the pandemic and Russia’s invasion of Ukraine, the price cap for the average household was set below £1,200.

Energy regulator Ofgem has faced severe criticism after the surge in prices led dozens of smaller energy retailers to go bust, with many of the costs passed on to bill- and taxpayers.

Jonathan Brearley, Ofgem’s chief executive, on Friday said record gas prices were “driving the cost of living crisis, causing real harm to customers and the wider economy”.

The regulator is making initial proposals to lower energy bills in the long term, including moving the energy system away from imported gas and reforms to wholesale electricity markets to reduce the impact of gas on pricing.

Additional reporting by Gill Plimmer in London