Energy price cap expected to rise by almost £1,000 in October, says Ofgem CEO

With price caps expected to rise by almost £1,000 ministers have said they are looking at options to help those who are struggling. ITV News' Daniel Hewitt reports.

The energy price cap in the UK is expected to rise by almost £1,000 in October when regulator Ofgem re-adjusts pricing for domestic customers.

Ofgem chief executive Jonathan Brearley has told the Business, Energy and Industrial Strategy Committee the regulator is expecting an energy price cap in October "in the region of £2,800", up from the £1,971 it is currently at.

The regulator is warning that a huge 12 million households could fall into fuel poverty when the cap rises, almost double the 6.5 million already in that situation.

The cap jumped by around £700 in April, adding hundreds to the household bills of people who were already struggling to contend with the cost-of-living crisis.

On top of sky-high energy bills, people are regularly seeing record fuel prices at petrol pumps, inflation is at a 40-year high of 9% and National Insurance contributions have increased.

And it could get even worse in October than forecast, with Mr Brearly telling the Committee "it's quite possible this [price cap] could go higher", adding: "The volatility in the gas market is huge."

Adam Scorer, chief executive of National Energy Action, said the price cap rising to the predicted level 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," he said.

The government has repeatedly said it stands ready to offer new support but has indicated it is waiting until it is clear what the situation will be in the autumn.

A top Tory MP - Robert Halfon - has called on the government to bring in a new furlough style scheme in light of Ofgem's warning that the price cap will increase. He says bills of £2,800 will require a response as significant as for the Covid pandemic.

He told ITV News Deputy Political Editor Anushka Asthana bills that high will feel "like a new ice age" with people freezing at home, and urged the need for massive state intervention.

Mr Halfon said green levies, windfall tax, VAT are all fine solutions, but will not go far enough if the warning is real.

ITV News' Political Editor Robert Peston analyses the steps the Government may take and what they will mean for people struggling with energy prices.

Labour says the price cap news is "extremely concerning and will cause huge worry for families already facing soaring bills and rising inflation".

Shadow Chancellor Rachel Reeves said: “How many more alarm bells does the chancellor need to hear before he acts? The government have got to get a grip on this crisis and to protect families and our economy. 

“Yet again, Labour calls urgently on the government to bring forward an emergency budget, with a windfall tax on oil and gas producer profits to lower bills for families.”

Boris Johnson's spokesman said some of the help from the government was "phased throughout the year".

"Some of the support is designed to come in in October, £200 will be discounted from energy bills, the warm home discount will increase to £150 and be expanded to cover three million people, cold weather payments and winter fuel payments will be available again," the spokesman said.

Consumer Editor Chris Choi has visited a community grocery, an expanding network around the country that have been seen as an alternative to foodbanks.

The government was also "actively looking at what more could be done in this space, that's something that the chancellor and prime minister are focused on".

But Mr Brearley told the Committee that energy costs are rising at a "once in a generation" rate "not seen since the 1970s" and it's something only the government could address.

"We need the government to step in," he said as Labour urged the government to offer further support to struggling families by raising cash through a windfall tax on the oil and gas giants.

Jonathan Ashworth, Labour's shadow work and pensions secretary, said: “Whether it’s their failure to grow the economy, real-terms cuts to social security, tax hikes, soaring economic inactivity, high levels of fraud, or spiralling energy bills, Conservative choices are making life harder for struggling families.

“Labour has a plan to tackle the cost of living crisis. We would get our economy firing on all cylinders and bring forward an Emergency Budget – including a one-off windfall tax on oil and gas producer profits – to ease the pressure on families.” 

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Business, Energy and Industrial Strategy Secretary Kwasi Kwarteng told the Committee he does not support a windfall tax but indicated he would accept any decision by Chancellor Rishi Sunak to impose one.

"I’ve been very clear about a windfall tax, I don’t think it supports investment, I don’t think it’s necessarily the right thing... but that’s up the chancellor," he said.

Ofgem chief executive Mr Brearley told the 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 10 times their normal level

"I know this is a very distressing time for customers but I do need to be clear with this committee, with customers and with the government about the likely price implications for October.

"Therefore later today I will be writing to the chancellor to give him our latest estimates of the price cap uplift.

"This is uncertain, we are only part way through the price cap window, but we are expecting a price cap in October in the region of £2,800."