As we edge closer to the next quarterly cap coming to an end of being calculated in the coming weeks, we take a look at how this may impact consumers in our latest forecasts.
Currently the government have in place the Energy Price Guarantee which is expected to increase from £2,500 to £3,000 from 1st April 2023.
In recent weeks we have seen a decrease in wholesale energy costs, however the way in which the price caps are calculated means the impact on the upcoming cap (effective 1st April) will be limited.
We currently forecast the next cap to out-turn at around £3,200 with the July and October caps at around £2,150 and £2,250 respectively.
Of course these numbers are annualised financial values based on the typical customer usage which Ofgem assume to be 12,000 kwh for gas and 2,900 kwh for electricity for a customer paying by monthly direct debit. There are other values calculated to account for alternative payment types and regional variations – however they are relatively small.
It should be made clear that the actual amount you will pay will be fully dependent on actual usage and the ‘cap’ element of the price cap is unit charge related and not the annualised ‘headline rate’ Ofgem announce.
In terms of those unit rate charges, we expect these to be approximately 12.5p/kwh for gas and 50.3p/kwh for electricity. This is on top of daily standing charges of 30p and 33p respectively.
Whilst these costs remain high compared to the past the good news here is that, based on the current forecasts, the government support scheme will only be required for the upcoming cap and only to a small value compared to the support required over the last six months. It also seems unlikely that any further support will be required beyond this period as the forecast values fall below the expected support rate. However it will be there as a safety net, should energy markets rise again, until 31st March 2024.
The April 2023 price cap calculation period comes to an end on 17th February 2023 with Ofgem making their formal announcement towards the end of the month. Calculations shall continue for the coming weeks and therefore the values mentioned in this report are a forecast based on the most up to date information available at the time of publication.