Ofgem chief executive Jonathan Brearley told MPs the regulator is expecting an energy price cap in October “in the region of £2,800” as the market copes with “once-in-a-generation” price changes “not seen since the oil crisis of the 1970s”.
Energy prices pushed the consumer prices index (CPI) to 9 per cent in April. Mr Brearley’s remarks immediately led to calls for the UK Government to do more to help households cope with the deepening cost-of-living crisis.
The SNP reiterated calls for Chancellor Rishi Sunak to launch an emergency budget, with MP Alan Brown – a member of the business, energy and industrial strategy (BEIS) committee – describing the £2,800 warning as a “devastating hammer blow to families”.
“As Ofgem has made clear, unless the UK Government urgently acts 12 million households could end up in fuel poverty,” he said. “This is a national emergency and it's shameful that the UK Government has failed to step up.”
Adam Scorer, chief executive of National Energy Action, said: “Ofgem’s warning that the price cap will rise again by over £800 in October will strike terror into the hearts of millions of people already unable to heat and power their homes.
“It will plunge households into deep, deep crisis. The financial, social and health impacts are unthinkable.
“The UK Government simply must act and use the welfare system and schemes such as Warm Homes Discount to get significant financial support to people before winter..”
The Resolution Foundation said almost ten million households could find themselves in “fuel stress” this winter if Ofgem’s prediction comes true.
The economic think-tank’s analysis suggests the number of families living in fuel stress – defined as spending at least a tenth of their total budgets on energy bills alone – will rise from five million to 9.6 million.
Jonny Marshall, senior economist at the Resolution Foundation, said: “The fact that the crisis is so heavily concentrated on low and middle-income households means it’s clear how the Government should target policy support.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “This news will be utterly devastating for the 6.1 million homes currently in fuel poverty and for the additional 1.7 million households who will now spend this winter struggling to keep themselves warm.”
He added: “Unless the Government acts now, it will have blood on its hands this winter.”
Mr Brearley told the BEIS committee: “I am afraid to say conditions have worsened in the global gas market since Russia’s invasion of Ukraine. Gas prices are higher and highly volatile. At times, they have now reached over ten times their normal level.
“I know this is a very distressing time for customers, but I do need to be clear.”
Ofgem’s prediction is a further 42 per cent hike on April’s price cap increase of 54 per cent, or an increase of £693 a year to £1,971 for those on default tariffs paying by direct debit for the average household.
Mr Brearley said future scenarios could include energy prices going even higher if Russia further disrupts gas supplies.