Scots could see energy bills more than double this winter in grave new cost of living crisis forecast

In a new grave new outlook for households the analysis say that bills are set to soar to around £3,582 in October, from £1,971 today, before rising even further in the New Year. That is over £200 a year more than its previous forecast.

And it predicts that market regulator Ofgem will put the price cap at £4,266 for the average household in the three months from the beginning of January.

The energy consultancy said that this was around £650 more than its previous forecast.

It comes as Ofgem last week announced changes to how it will calculate the price cap on energy bills going forward.

Around 1.5m Scots households saw their energy bills soar by up to £693 a year after Ofgem hiked the price cap by the biggest increase yet in April.

From April 1, the 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 - have seen a rise of £708 from £1,309 to £2017.

The sharp 54% rise, which impacted half the population, was said to be driven by a record rise in global gas prices, with wholesale prices quadrupling in the last year.

The dire forecast comes a day after Scotland’s First Minister called for an urgent meeting between the heads of the devolved administrations to address the cost-of-living crisis.

In a letter sent on Monday, Nicola Sturgeon urged the Prime Minister to move a proposed meeting between the heads of the UK’s Governments from September to this week.

“While our price cap forecasts have been steadily rising since the summer 2022 cap was set in April, an increase of over £650 in the January predictions comes as a fresh shock,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.

“The cost-of-living crisis was already top of the news agenda as more and more people face fuel poverty – this will only compound the concerns.

“Many may consider the changes made by Ofgem to the hedging formula, which have contributed to the predicted increase in bills, to be unwise at a time when so many people are already struggling.”

However, he also defended Ofgem’s decision, which will hopefully lead to lower bills in the second half of next year.

This will happen because Ofgem is making it easier for energy suppliers to recover their costs. By doing this, fewer suppliers will fail – and the cost of those failures will not need to be passed on to customers.

“With many energy suppliers under financial pressure, and some currently making a loss, maintaining the current timeframe for suppliers to recover their hedging costs could risk a repeat of the sizable exodus seen in 2021,” Mr Lowrey said.

“Given that the costs of supplier failure are ultimately met by consumers through their energy bills, a change which means that this is less likely is welcome, even if the timing of it may well not be.”

Part of the increase in the forecast is also due to rising wholesale energy prices, Cornwall said.

The price cap forecasts from Cornwall showed bills reaching £4,427 in April, before finally dropping slightly to £3,810 from July and £3,781 from October next year.

Dr Lowrey said that the Government must take action to step in and protect households from the runaway costs.

The Government has already promised £400 to every household, and extra help for the more vulnerable.

“If the £400 was not enough to make a dent in the impact of our previous forecast, it most certainly is not enough now,” Mr Lowrey said.

He said that the current price cap is not controlling consumer prices and damaging suppliers’ business models, and asked if it was fit for purpose.

“The Government must make introducing more support over the first two quarters of 2023 a number one priority.

“In the longer-term, a social tariff or other support mechanism to target support at the most vulnerable in society are options that we at Cornwall Insight have proposed previously.

“Right now, the current price cap is not working for consumers, suppliers, or the economy.”

It came as the Government was warned by business leaders that it must have “all hands to the pump” to address the crisis ahead of the autumn.

Last week, the Bank of England announced projections that could see inflation rise above 13% in October.

Tony Danker, director general of the Confederation of British Industry (CBI), joined former prime minister Gordon Brown’s call for swift intervention to address rising energy costs.

But Downing Street said Mr Johnson had no plans to introduce major new fiscal measures before the end of his premiership.

Mr Danker said: “The economic situation people and businesses are facing requires all hands to the pump this summer.

“We simply cannot afford a summer of Government inactivity while the leadership contest plays out followed by a slow start from a new prime minister and cabinet.

“The Prime Minister and Chancellor should be taking the next few weeks to grip the emerging crisis and the planning required to tackle it. This will also give their successor – whomever that may be – the very best chance of getting quickly out of the blocks.”

He added that the Prime Minister and the candidates vying to replace him – Rishi Sunak and Liz Truss – should “come together to agree a common pledge to support people and help quell fears”.

The CBI also called for top civil servants to be directed to draft options to help struggling households ahead of a new prime minister being selected.

The Prime Minister’s official spokesman said Mr Johnson – who is back in No 10 following his holiday in Slovenia – would be speaking to Chancellor Nadhim Zahawi to ensure that support measures due to come into effect later in the year remained on track.

But the spokesman added that any further measures would be a matter for Mr Johnson’s successor once the Tory leadership contest concludes.

Mr Johnson has been urged by Mr Brown to trigger the UK Government’s emergency response committee to deal with the crisis.