30 June 2023 , 10:35
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Households are likely to pay higher energy bills for the foreseeable future, according to the owner of British Gas.
Chris O'Shea, chief executive of Centrica, owner of British Gas, told the BBC prices are likely to stay higher than what they were before the energy crisis.
Comparatively, the Ofgem price cap was set at £1,277 a year for the typical household in 2021/22 - before that, it was £1,138 and £1,042.
The price cap is currently at £3,280 a year and will fall to £2,074 from tomorrow (July 1).
The Centrica boss told the BBC: "I think the first act of the crisis is over."
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"I think what we've got to remember is the energy prices had more than doubled before Russia invaded Ukraine.
"Now, prices are back down to pre-invasion levels but they're still two and a half times the long run average."
The comments come after Cornwall Insight announced its latest Ofgem price cap forecast.
The energy analytics and consultancy firm expects the cap, which limits what companies can charge per unit of gas and electricity, to fall again in October to £1,978 from the £2,074 cap which will come in this weekend.
However, it predicts bills will rise above the £2,000 mark again in January next year with a price cap prediction of £2,004.40.
Ofgem used to set the price cap every six months however since August last year, it now reviews the cap every three months.
The next announcement for the price cap will come in August and will cover October to December.
But it's important to note that these predictions relate to the expected cost for those on a duel fuel tariff who pay by direct debit and from July for those on prepayment meters.
Those who pay on receipt of their bill through either credit, debit card, cheque or standing order will still pay higher gas and electricity rates to take into account higher supplier processing costs.
Dr Craig Lowrey, principal consultant at Cornwall Insight said: "The fall in the average price cap predictions reflects Ofgem's efforts to align with the evolving energy consumption patterns of typical households as consumers respond to high prices by reducing their energy usage.
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"While typical household predictions may provide some insight for consumers, households are still facing the challenge of bills that are well above historic levels.
"In light of this, it becomes crucial to explore alternative measures that can better protect consumers, promote fair competition, and ensure affordable and transparent energy pricing for all.
"The exploration of options such as social tariffs, energy efficiency initiatives, and various other avenues should be prioritised."
July price cap will be the first time energy bills have dropped in two years as the price of wholesale gas has gone down.
However, prices are still much higher than they were last year when the price cap sat at £1,971.
What has Ofgem's price cap been since it started?
Ofgem’s price cap was initially put in place in January 2019 by Theresa May’s Government to prevent energy firms from overcharging customers.
Since then, the price cap has been:
- January - March 2019 - £1,104
- April to September 2019 - £1,217
- October 2019 to March 2020 - £1,143
- April to September 2020 - £1,126
- October 2020 to 31 March 2021 - £1,042
- April to September 2021 - £1,138
- October 2021 to 31 March 2022 - £1,277
- April – September 2022 - £1,971
- October – December 2022 - £3,549 - Governemnt's Energy Price Cap introduced - £2,500
- January - March 2023 - £4,279
- April - July 2023 - £3,280
- July - September 2023 - £2,074
Cornwall Insight Predictions
- October - December 2023 - £1,978.33
- January - March 2024 - £2,004.40