Typical household energy bills in Britain will rise to £1,729 a year from October 1, according to a forecast from Cornwall Insight, a respected energy analytics firm.
Cornwall Insight predicts that Ofgem's energy price cap will increase by 4 per cent for the average household, up from the current level of £1,663.
The price cap governs energy bills for households on standard variable tariffs, which people are usually placed on if they have not fixed their energy prices for a year or more. It caps the price per unit of energy used, and the £1,729 figure is based on a household using an average amount of gas and electricity. Households that use more or less energy than average will see different bills.
This is Cornwall Insight's final forecast before Ofgem, the energy regulator, announces the new price cap on August 26.
The forecast rise is being driven by the ongoing conflict in the Middle East, which has pushed wholesale gas prices to their highest level in almost four years.
Inflation and further increases expected
Cornwall Insight's latest prediction comes as UK inflation accelerated to 2.9 per cent in July, following the earlier energy price cap increase. Although it is still too early to confidently predict January's price cap, Cornwall Insight currently expects a further increase, meaning elevated bills are likely to continue through the colder months.
Richard Neudegg, director of regulation at price comparison website Uswitch, said households that do not fix their energy tariff will be paying more than necessary. He said standard gas prices are likely to be "a staggering 26 per cent higher than they were last year."
Energy suppliers issue their own price cap predictions too. British Gas expects the cap to rise to £1,730 from October 1 and says it has "medium" confidence in that forecast, while EDF Energy predicts a rise to £1,722.
Why the price cap changed
Ofgem updated its typical energy consumption values in July to reflect that people are using less energy than before. This adjustment makes the price cap appear lower: the July cap was previously announced at £1,862 but stands at £1,663 under the new consumption rates.
However, energy itself has not become cheaper. Households are simply changing their behaviour in response to higher bills. Anyone who has not fixed their energy tariff in a year or more is likely on a price cap tariff, and it may be worth checking whether switching to a fixed deal would save money.
Should households fix their energy bills?
Neudegg said a fixed energy tariff could offer an "escape route" from the predicted price cap rise.
"The best fixed deals on the market right now undercut this prediction by around 12 per cent, with the cheapest priced at £1,522 for a typical home," he said. "Every week spent on a standard tariff is another week paying higher rates than you need to."
A fixed energy deal gives households certainty over their bills and protects them against volatility in the energy market. Consumers can check how much a fixed tariff would cost from their existing supplier or compare new deals through comparison websites.
Smaller energy suppliers generally top the list of the best fixed energy deals. Earlier in the week, Eon Next was offering the second-cheapest fix, a two-year tariff priced £111 below the current price cap and £177 below Cornwall Insight's prediction for October.
