A rise would be unwelcome news for Prime Minister Keir Starmer’s Labour government, which is under pressure to meet a pledge to curb household energy costs
International News via Reuters:
Britain’s domestic energy price cap is forecast to rise by about 10% in July in response to a surge in wholesale prices tied to the war in Iran, analysts at Cornwall Insight said on Wednesday.
A rise would be unwelcome news for Prime Minister Keir Starmer’s Labour government, which is under pressure to meet a pledge to curb household energy costs.
It would also wipe out the savings made from the decision to scrap a policy that forces energy suppliers to pay for measures like insulation and new heating systems for low-income households and move some levies onto general taxation.
Wholesale energy prices are the largest single factor contributing to British energy regulator Ofgem’s domestic price cap, which is set on a quarterly basis using a formula that also reflects suppliers’ network costs and environmental and social levies.
Disruptions to shipping in the Middle East and a halt to liquefied natural gas exports from Qatar, one of the world’s largest gas exporters, has led to a surge in international gas prices. Gas prices in Britain are currently more than 70% higher than last week.
“This latest forecast puts the role of wholesale markets firmly back in the spotlight and illustrates how exposed UK households remain to international market movements,” said Craig Lowrey, principal consultant at Cornwall Insight.
Cornwall Insight forecasts Ofgem’s price cap will rise in July to 1,801 pounds ($2,409) a year for typical use, from 1,641 pounds in April.
A spokesperson for Britain’s Department for Energy Security and Net Zero said using short-term price fluctuations to predict coming prices was not reliable and the only way to protect consumers from price spikes is to curb fossil fuel use.
Ofgem is expected to publish the next price cap level by May 27, and Lowrey said the forecast could change before then if wholesale prices fall or rise further.
($1 = 0.7476 pounds)
Reporting by Susanna Twidale. Editing by Paul Simao and Mark Potter
