British households warned energy price cap will double

One of the most bleak forecasts yet for the future of Britain's energy markets has warned that a raising of the price cap in April could see millions of households facing an increase of 56 percent on their bills, pushing annual energy expenditure toward two thousand pounds ($2,650).

In April, energy industry regulator Ofgem will reassess the capped price that suppliers are allowed to charge customers, which since October has been set at just under 1300 pounds.

Volatile market prices worldwide have seen 26 suppliers in the United Kingdom go out of business since August, as the cap, which is based on average consumption, limits how much of the price increase that suppliers pay can be passed on to customers.

But with wholesale gas prices in the UK currently trading at six times their level at the start of the year, a significant change seems inevitable.

"Right now people have been insulated from those wholesale price rises but we are really, really worried about what happens in April," Audrey Gallacher, director of retail at Energy UK, told the Financial Times.

"Many people are in for a shock," added Michael Lewis, chief executive of Eon, Britain's largest electricity supplier. "Most households are not aware of what is coming."

Tim Lord of the Tony Blair Institute told ITV News that intervention was needed to avoid making existing problems of fuel poverty much worse.

"Unless government can find a way of acting to address some of the impacts, in particular on people on the lowest incomes, I think it could cause genuine hardship," he said. "Already, people struggle to make ends meet, week to week and month to month."

The energy price cap exists for the benefit of more than 15 million households in the UK that opt not to shop around to find the best fixed price deals. Generally, fixed price deals have been better value, although the price push has seen some companies offer fixed price deals above the current cap limit.

The vast majority of the estimated figure of two thousand pounds is the cost of the fuel itself, but there are other factors, such as the cost of helping customers of failed suppliers, and funding for renewable energy development, that could potentially be delayed. The FT reports that energy companies and charities have for some time been urging the government to find a better way to manage these additional charges.

Bill Bullen, founder and CEO of energy supplier Utilita, told the BBC Radio 4 Today program that the energy regulator itself had to accept part of the blame for the predicament the industry, and as a result customers, were now in. "We can't duck the fact that we're in this situation because of some pretty serious regulatory failures," he said.