Pressure is mounting on the government to announce a new support program for struggling households as energy bills are now set to top £4,200 from January.

Consultancy Cornwall Insight said on Tuesday it expected the energy price cap to reach £4,266 a year for the first three months of next year.

The consultancy predicts bills could reach £4,426 in the second quarter of next year before falling. Only a week ago, Cornwall Insight predicted the energy price cap was set to rise to £3,615 a year from January.

Consumer champion Martin Lewis said the latest forecast was “tragic news” and urged the “zombie government” to come up with an immediate plan of action to help households.

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Cornwall Insight said rising wholesale prices and a review of the methodology used by regulator Ofgem to calculate the price cap were behind the increase in its forecast.

The consultancy’s lead consultant, Dr Craig Lowrey, said: ‘It is essential that the government use our forecast to prompt a review of the consumer support package.

The consultancy now expects the cap to rise to £3,582 from October, an increase of £200 from its last forecast. He expects bills to start easing next summer, to £3,810 in the third quarter and then to £3,781 in the last three months of next year.

The cap, which is set quarterly by energy sector regulator Ofgem, was £1,400 a year as recently as October last year.

Former Chancellor Rishi Sunak announced a £15billion consumer support package in May, including £400 for each household. However, rising wholesale prices have since threatened to wipe out the impact of that support and Sunak and his Tory leadership rival Liz Truss are under pressure to announce further measures.

Lowrey said: “If the £400 wasn’t enough to reduce the impact of our previous forecast, it certainly isn’t enough now.

“The government must make the introduction of additional support in the first two quarters of 2023 a number one priority. In the longer term, a social tariff or other support mechanism to target support to the most vulnerable in society are options that we at Cornwall Insight have previously proposed. Right now, the current price cap is not working for consumers, suppliers or the economy.

Graph showing default price cap over time

Ofgem last week confirmed plans to update the price cap every three months to enable suppliers to better manage the risk of wholesale price volatility and prevent price increases for consumers due to the bankruptcy of suppliers.

The regulator is trying to prevent a repeat of the events of last year, when nearly 30 suppliers collapsed, in part due to a rise in wholesale energy prices.

Lowrey said changes to the cap resulted in an increase in his forecast. However, he said the move would protect cost-stricken providers and prevent the cost of their meltdowns from being added to consumer bills.

Ofgem expects to confirm the level of the next price cap on August 26, days before the next Prime Minister is announced on September 5. The cap will come into effect on October 1.

Breaking a self-imposed silence on social media to respond to the latest forecast, Martin Lewis wrote on Twitter: “We must act and plan now. The zombie government must wake up before September 5th. The leadership debate must no longer ignore this disastrous national cataclysm.

Lewis added: “People’s livelihoods, mental well-being and in some cases very lives depend on it. It’s hopeless.

tragic news

The last @CornwallInsight the forecast, based on Ofgem’s new methodology, is an increase in the price cap of 81% in October (bringing the typical bill to £3,582/year) and a further 19% in January (so £4,266/year )

Action and planning are needed now. The zombie government must wake up before September 5…

— Martin Lewis (@MartinSLewis) August 9, 2022

Simon Francis, Coordinator of the End Fuel Poverty Coalition, said: “A tsunami of fuel poverty will hit the country this winter and these latest estimates demonstrate once again that the level of support already pledged by the government is just a drop in the ocean.

“It is welcome that Rishi Sunak has finally acknowledged this and promised more support for the most vulnerable if he becomes Prime Minister. Liz Truss now has to wake up and realize that her tax cut plans will not keep people warm this winter.

Jane Tully, director of the Money Advice Trust, said: “The government support announced so far to help cope with rising energy prices and the cost of living has been welcome, but does not match to the magnitude of the challenge that households are currently facing.”