However, the planned £1.4bn savings could be wiped out by an unintended £4bn benefit bill if hundreds of thousands of retirees rush to claim pension credit to qualify for winter fuel payments, data analysts Policy in Practice have warned.
Craig Lowrey, principal consultant at Cornwall Insight, said: “This is not the news households want to hear when moving into the colder months. Following two consecutive falls in the cap, I’m sure many hoped we were on a steady path back to pre-crisis prices.
“However, the lingering impact of the energy crisis has left us with a market that’s still highly volatile and quick to react to any bad news on the supply front.”
The predicted price cap increase comes amid warnings that Britain’s reliance on foreign imports is leaving households exposed to higher prices.
Cornwall Insight noted that although energy prices have stabilised, they have not fully recovered from the energy crisis and the impact of Russia’s invasion of Ukraine.
It warned that the UK’s reliance on imported energy had left the country “very vulnerable” to global events which could disrupt supply, and was keeping household and business energy bills far above pre-crisis levels.
The energy price cap is updated every three months and covers 28m households in England, Wales and Scotland.
It fixes the maximum price that energy supplies can charge domestic households per unit of energy.
Cornwall Insight also predicted that the price cap would show another “modest increase” in January 2025 but warned of further increases at the start of next year as a result of recent tensions in the Russian-Ukraine war.
The research firm said: “Over the past few months gas and electricity wholesale prices have rebounded, from their 30-month lows in February. The rise in wholesale market prices, particularly since the start of August, has been the key driver behind the forecast uptick in bills.”
Mr Lowrey called on the Government to take immediate action to ease the financial burden on households.
Proposals included introducing discounted energy bills, revising social benefits or reforming the price cap. Ofgem is reviewing the price cap in response to the UK’s net zero push.
Mr Lowrey also urged the Government to overhaul the energy system rather than waiting for prices to drop on their own.
Cornwall Insight said: “In the longer-term, a shift towards sustainable, home-generated energy will be necessary to reduce the UK’s vulnerability to international shocks.
“There have been some positive signals from the Government, such as increasing the budget for the renewables auction and lifting the de facto ban on onshore wind. However, much more progress is needed.”