Energy Prices Rising Faster Than Predicted, UK Regulator Warns

File photo showing a gas stove. (John Stillwell/PA)

Energy prices have been rising faster this year than previously predicted, the chief executive of Britain’s energy regulator Ofgem has said.

Speaking to the Public Accounts Committee in the House of Commons on July 11, Jonathan Brearley said that energy prices appear higher than when Ofgem made its estimate.

He told MPs, “It’s clear given the pricing dynamics we’re seeing, given the ongoing impact of the Russian invasion of Ukraine, that there is positive pricing pressure there—as in prices are looking higher than they did when we made that estimate.”

In May, Ofgem predicted that the price cap would reach £2,800 ($3,320) when it is next changed in October. But experts are now expecting the cap to reach a figure of over £3,200 ($3,790).

The energy price cap already ballooned by 54 percent in April, hitting £1,971 ($2,336) as gas prices soared from last summer.

The cap is calculated based on the price of gas and electricity on the wholesale market, setting what Ofgem believes is a fair price for suppliers to charge their customers.

Financial Worries

Soaring energy prices are piling pressure on British households already suffering from high inflation.

Data from Barclaycard last month revealed that 91 percent of consumers were concerned about the impact rising household bills are having on their personal finances, compared to 88 percent in May.

Spending on utilities witnessed the steepest rise. Many are cutting back on their energy and water consumption due to a 39.6 percent year-on-year increase in the cost of household essentials.

Spending on essential items also rose by 4.4 percent in June compared to the same month a year ago, largely as a result of mounting petrol and diesel prices.

Row Over New Oilfields

Last week, energy minister Greg Hands warned that the price of energy will increase even further if oilfield projects like Cambo do not go ahead.

Environmental groups have called for an end to new oil and gas fields, with Scotland’s First Minister Nicola Sturgeon also opposed to the Cambo field.

The Cambo development was paused in December and is awaiting final approval from regulators.

If Cambo and projects like it do not go ahead, Hands said: “It would almost certainly drive up the price of energy, and it would almost certainly be bad for energy security, and it’s likely to be bad for emissions.”

Imported gas has higher emissions associated with it than gas from the UK continental shelf, he said.

PA Media contributed to this report.