Energy Bills to Hit £1,000 in 2030s
The average price for yearly energy bills was about £1,000 in pre-pandemic levels, according to Ofgem. Now, they’re at a record high as households are paying roughly £2,500 a year, but only thanks to the government intervention with the Energy Price Guarantee. But how long will they stay this high?
Back in 2018, households could take advantage of the competitive energy market, which was offering reasonably priced tariffs by gas and electricity firms. Without government help, the Ofgem cap is currently at £4,279. This is a limit on the amount that energy suppliers are allowed to charge in a year and if they don’t raise their prices to the cap, they quickly find themselves going under.
Fortunately, even though the cap has gone up, the government help is here to stay until at least April 2024. But while experts have predicted that the Ofgem price cap won’t go back to pre-pandemic levels until at least 2030, will the Energy Price Guarantee, or something similar, still be around until that time?
Cornwall Insight and Auxilione have both put their predictions out for the Ofgem price cap throughout the years, and have usually been spot on. Cornwall Insight believes an average £1,000 energy bill will only be possible from 2030. Wholesale prices are believed to stay at their high levels for the rest of the 2020s. Auxilione, on the other hand, went further to say that we won’t see bills below £3,000 until at least July 2024.
The energy consultants both say that this will be the case unless there is a crash in wholesale prices, and this isn’t expected to happen. Even though energy prices fluctuate based on seasonal temperatures and demand, the prices will stay on the high end of the scale. And while gas stockpiling has happened through the mild winter, leading to a slight drop in expected energy bills this year, any cold snaps will deplete these reserves and drive costs back up again.
Since the end of the pandemic, countries have been opening up as normal again, which has led to a massive spike in the demand for energy. Since a lot of energy and gas generation facilities had to close, it’s been a case of catching up with the demand, which has sent prices soaring. Russia’s war in Ukraine has also had a massive impact on energy prices as countries around the world have imposed sanctions and pipelines have been severed. Without cheap Russian gas to rely on, there has been a real push for alternatives and stockpiling.
What’s worse is that the government support for energy will become more relaxed from April 2023. The average price will go up to £3,000 and the £400 energy rebate will not be repeated. There will, however, be more help for those on means-tested benefits, including disability benefits and the elderly. If you’re lucky enough to be in credit with your energy supplier, it’s advisable to have at least a month’s worth in reserve. If you have much more than this, then it might be worth asking for your money back.