Ofgem, the energy regulator, has forecast that the energy price cap is likely to rise by over 40% in October. This will push the average household bill up to £2,800 a year.
The energy price cap is lifted twice a year, with changes primarily based on wholesale energy prices over the previous period. In the UK, wholesale natural gas prices make up a large proportion of this.
The Russian invasion of Ukraine has led to a huge spike in the price of wholesale natural gas. Prices peaked at nearly ten times recent average gas prices.
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The expected rise in the price cap may lead to the number of people living in fuel poverty doubling from 6 million to 12 million. A household in fuel poverty spends more than 10% of its disposable income on energy.
Earlier this month the Bank of England forecast that once the energy price cap is lifted in October, inflation will reach around 10% on the CPI measure. This will be the highest level in 40 years.
In March the Office for Budget Responsibility forecast that, households face the greatest fall in living standards since records began.
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