Scots households face 42% energy price rise bombshell

Energy price experts Cornwall Insight expect the price cap - which the public is so far protected from - to fall from its current record rate of £4,279 per year to £3,294 for the three-month window.

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It has warned that businesses could face charges of 70-80% more for energy from April 1, especially if their energy prices are not bought in advance in a practice known as hedging. Cornwall Insight said such increases could have a “catastrophic” effect for many smaller businesses.

A second report from banking group Investec said its “final” forecast for the April to June period was £3,332.

Under the UK government's energy price guarantee scheme, the average household dual fuel energy bills will rise to £3,000 a year between April and June up from the current £2,500.

But the current support comes alongside a separate £400 discount which will no longer be available.

The typical energy bill will now amount to around 10% of the average Scottish salary.

It means the price cap will be £1,000-£1,200 per year less than when the energy industry crisis saw 30 suppliers collapse and Russia’s invasion of Ukraine drove gas prices to record highs.

Campaigners have called on the Government to extend its support schemes to further help households struggling with the cost of living crisis.

Before the UK government stepped in, the upward curve of energy price rises began in April, last year when 1.5m Scots households saw their energy bills soar by up to £693 a year after the energy market regulator Ofgem hiked the price cap by the biggest increase yet.

It meant that three in four customers on default tariffs paying by direct debit saw an increase of £693 from £1,277 to £1971 while the rest who are on prepayment meters - and tend to be among the most vulnerable - saw a rise of £708 from £1,309 to £2017.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Regrettably, the forecast for April looks set to leave the price cap above the increased Energy Price Guarantee level.

“While tumbling cap projections are a positive, unfortunately already-stretched households will be seeing little benefit before July.”

He added the pain of higher bills could be relatively short-lived, as falling wholesale gas prices could mean the return of more competitive energy deals.

The energy specialists expect the cap to drop heavily in the second half of the year, when the fall in gas prices will be reflected in the buy-in-advance contracts which is how suppliers typically buy energy for customers.

But that is not expected to be in felt in time for the second quarter update, meaning a challenging period awaits households this spring.

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Energy suppliers buy energy in advance in an attempt to avoid spikes in oil prices. It can protect suppliers against unexpected price surges.

But if they buy too little, they must buy on the spot market, energy sold at real-time prices, to ‘top-up’.

This can be expensive and volatile. If they purchase too much, they must sell off their excess energy and experts say this can be a lottery.

Larger companies, or those with more financial clout, are able to afford to hedge more but smaller companies are unable to do the same. Suppliers using the spot market have resulted in them selling energy at a loss.

A sharp drop in wholesale gas and electricity prices in recent times has raised hopes the worst of the energy crisis could be diminishing. Fuel poverty campaigners say the falling prices means the extent of taxpayer support will be reduced and consumers will need more help during the cost of living crisis.

Consumer finance expert Martin Lewis said that allowing bills to increase in April would be a “national act of harm”.

Rocio Concha, of consumer group Which? , added: “The forecast that the energy price cap will be £3,295 from April is concerning. Even though consumers will be protected by the energy price guarantee, people will still face a sharp spike in energy prices when the energy bill support scheme comes to an end and the guarantee increases from the current £2,500 to £3,000 for the average household in April.

“This increase will be especially difficult for pre-payment meter customers – who are more likely to be on lower incomes – to manage, as they can’t spread these increased costs out evenly over the coming year.

“In the absence of an effective means to target support, the best thing the government can do to support people is to postpone increasing the energy price guarantee to £3,000. For some families, who continue to be battered by high inflation, this will offer an important lifeline to stop them from falling into financial distress.”

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The Trades Union Congress called on the Government to set up a public energy company to lower bills, saying that workers on low pay were being hit the hardest.

A full-time UK minimum wage worker will face bills worth 16% of their monthly salary when prices are raised in April – up from 8% in March 2022, the TUCS said.

It repeated its calls for a higher windfall tax on big oil and gas companies and urged ministers to end “Britain’s living standards nightmare”.

The TUC claimed the UK energy market has become a “racket” with oil and gas firms making billions in profits while families struggle to heat their homes.

TUC general secretary Paul Nowak said: “The Government must cancel its imminent hike in household energy bills at next month’s budget. Families across Britain are being pushed to the brink by sky-high bills."