New Energy Price Cap January Increase
The energy price cap is to be increased yet again in January 2023
Energy regulator Ofgem has announced that the energy price cap is going up again with analysts predicting it could rise around £3,334 in January 2023.
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This follows a planned rise in October 2022 when the current cap will rise from £1,971 for standard default tariffs to £3,245.
Analysts say the January increase will jump to £3,364 – a rise of more than £360 from forecasts less than a month ago.
The latest calculations mean that energy bills will rise to levels even higher than previously predicted this winter.
Major volatility in the energy market is driving wholesale prices ever higher. It is being caused by influences such as uncertainty surrounding Russian gas supplies to continental Europe, along with factors such as a strike threat by Norwegian gas workers.
Ofgem sets the energy price cap which is intended to limit how much suppliers can charge consumers for utilities.
It reflects wholesale prices, so customers have to pay significantly more when energy firms’ costs are higher.
Analysts at investment firm Cornwall Insight have warned that the price cap on annual energy bills would rise from:
- £1,971 for standard default tariffs now
- £2,980 when the next adjustment takes effect in October
- £3,003 in January 2023.
The firm has now released new forecasts that indicate the current cap will rise from:
- £1,971 now to £3,245 in October
- Then another increase in January to £3,364
Ofgem is due to announce the price cap change for October in August.
In December 2021 Cornwall Insight forecast this April 2022’s price cap increase to within 3%.
Dr Craig Lowrey, principal consultant at the firm, said: ‘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.’
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 into the figure, with little hope of relief from the predicted high energy bills.
He added that Ofgem continually reviews the cap and there are many consultations and potential reforms which could impact these forecasts. But it looks like everyone is facing the prospect of a very expensive winter.
What can landlords do to support tenants?
The energy increase is going to hit everyone. Landlords will be worried about their own residential bills and tenants will struggle with food prices, rent and energy bills.
Before the cold weather hits and energy usage goes up:
- Talk to your tenant. Check in with them to see how they feel about the upcoming increases. It may be that they wish to break their agreement early in order to find somewhere cheaper to live. While this can be frustrating, it’s better to know now and work together to make this an easy transition than to find your tenant is unable to make the rent this winter. If this is still a worry for you, purchase Rent Guarantee Insurance now to give you peace of mind
- Invest, if you can. Dig out your EPC and have a look at the recommendations – is there anything you can do to your property to make it more energy efficient? Often, these are usually expensive, but if there are any quick wins (like switching to LED bulbs), every little helps!
- Prepare now. Purchase items like draft excluders for doors and windows now. This could really help keep the warmth in and reduce energy usage