LONDON (Reuters) – Britain’s domestic energy price cap is expected to rise a further 3% in April, with geopolitical instability keeping wholesale energy prices high, analysts at Cornwall Insight said on Tuesday.
The price cap is already set to rise by 1% in January and a further increase would be a blow to Britons hoping energy prices would cool to help them cope with a cost of living squeeze and help curb inflation.
“With a Trump presidency on the horizon, and an uncertain geopolitical situation in the Ukraine and the Middle East, wholesale market volatility looks set to remain,” Craig Lowrey, principal consultant at Cornwall Insight, said.
Energy regulator Ofgem sets a cap on household energy bills each quarter using a formula that reflects wholesale energy prices and also takes into account suppliers’ network costs and environmental and social levies.
Cornwall Insight forecasts Ofgem’s price cap will rise in April to 1,785 pounds ($2,243) a year based on average use, up from 1,738 pounds a year in January.
Benchmark British gas prices have risen around 20% in the past two weeks as colder weather has led to more withdrawals from gas storage sites across Europe and with a deal for Russian gas supplies to flow to Europe via Ukraine set to expire at the end of the year.
Lowery said high volatility in the market means the cap forecast could change again before being set by Ofgem towards the end of February.
($1 = 0.7957 pounds)
(Reporting By Susanna Twidale; Editing by Kim Coghill)
