UK energy bills to rise by 80% in October as regulator announces hike

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LONDON – Britain’s energy regulator announced Friday it will raise its key consumer energy bill ceiling from £1,971 a year to an average of £3,549 as campaign groups, think tanks and politicians call on the government to tackle a cost of living crisis. to grab.

The price cap limits the standard rate that energy suppliers can charge for their combined electricity and gas bills in England, Scotland and Wales, but is recalculated by Ofgem throughout the year to reflect wholesale market prices and other industry costs.

It includes about 24 million households. The 4.5 million households with prepayment plans face an increase from £2,017 to £3,608.

The limit does not apply in Northern Ireland where suppliers may increase prices at any time subject to approval from another regulatory body.

Gas prices have soared to record levels over the past year as higher global demand in Europe has fueled low gas storage levels and a decline in pipeline imports from Russia following the invasion of Ukraine. Electricity prices have also risen as a result.

Earlier this month, Ofgem announced that it will recalculate the cap every three months instead of every six months to reflect current market volatility.

Consultancy Cornwall Insight predicts the cap could rise to £4,649.72 in the first quarter of 2023 and to £5,341.08 in the second quarter, before falling slightly to £4,767.97 in the third quarter.

That’s still higher than an average annual bill of £1,400 in October 2021 and the current limit of £1,971.

‘A catastrophe’

In July, the government announced it would pay a £400 grant to all households over six months from October to help with bills, with an additional one-off payment of £650 to 8 million vulnerable households. Some vendors have also announced customer support packages.

However, this has been widely criticized for failing to address the magnitude of the problem, which has been compared in impact on the population to the Covid-19 pandemic and the 2008 financial crash.

“Disaster is coming this winter as rising energy bills risk causing serious physical and financial damage to families across Britain,” said Jonny Marshall, senior economist at the think tank Resolution Foundation, ahead of the announcement.

“We are on track for thousands to shut down their energy completely, while millions will be unable to pay bills and build up unmanageable backlogs.”

Various strategies to tackle the crisis have been put forward by politicians, consultancies and suppliers themselves, but the ongoing UK leadership elections have meant that no new policy announcements have been made despite the impending spike in bills.

The candidates, Liz Truss and Rishi Sunak, have both discussed the need to provide additional support to households and businesses, but said no decision will be made until the new prime minister is elected on September 5.

At a leadership meeting Thursday night, Sunak said he would provide further “direct financial support” to vulnerable groups.

Truss, the current favorite to win the contest, echoed previous comments about wanting to use tax cuts to ease pressure on households, reversing the recent increase in national insurance policies and suspending the green energy tax on bills.

Plan needed

Possible options on the table include freezing the price cap at its current lower level – which energy suppliers say should be financed through a government-controlled financing package to avoid destabilizing the sector – or raising the price cap. and expanding domestic support.

Consumer group Which one? on Thursday, the government said household payments should be increased from £400 to £1,000, with an additional one-off minimum payment of £150 to the lowest-income households, to prevent millions from falling into financial trouble.

The opposition Labor party has said it would freeze the April to October limit until winter by extending the recently introduced windfall tax on oil and gas companies, scrapping the £400 universal payout and finding other savings to help the limit to freeze in winter.

Jonathan Brearley, chief executive of Ofgem, said any response is needed to “match the scale of the crisis we have ahead of us” and involve regulators, government, industry, NGOs and consumers working together.

“We know the huge impact this price cap hike will have on households across the UK and the tough decisions consumers now have to make,” Brearley said.

“The government’s bailout package is providing help at the moment, but it is clear that the new prime minister will need to take further action to address the impact of the price hikes coming in October and next year.

“We are working with ministers, consumer groups and industry on a range of options for the incoming prime minister that will require urgent action.”

“The new prime minister will have to think the unthinkable in terms of the policies needed to get enough support where it’s most needed,” said Marshall of the Resolution Foundation.

“An innovative social tariff could provide broader targeted support, but present huge delivery challenges, while freezing the price cap gives too much away to the least deprived. This problem could be overcome with a solidarity tax for high earners – an unthinkable policy in the context of the leadership debates, but a practical solution to the realities facing families this winter.”

CNBC has contacted the government for comment.

Cost of buying gas

Emma Pinchbeck, chief executive of the energy industry trade association Energy UK, told the BBC Friday morning that the industry would continue to call for government intervention to help both consumers and the impact on the economy at large.

“Most [suppliers] making a negative margin in recent years is one of the reasons we lost 29 suppliers from the market. So when you look at this and the magnitude of this crisis, we’re talking about something that’s much bigger than the industry can handle, despite the help that’s been given, despite charging the maximum cost of buying gas.”

Pinchbeck said the industry favored a shortage rate scheme that allows suppliers to keep prices at their current levels and have their costs covered by a loan because it is the quickest to implement.

Wider Challenge

Faced with the same rising wholesale prices and varying degrees of dependence on Russian gas, European governments are launching their own support packages for citizens.

France has completely nationalized energy supplier EDF at an estimated cost of 9.7 billion euros, limiting electricity tariff increases to 4%.

German households will pay about 500 euros ($509) more on their annual gas bills through April 2024 through a levy to help utilities cover the cost of replacing lost Russian supplies, and electricity prices will also rise. The cabinet is talking about an exemption from sales tax on the levy and an aid package for poorer households, but is also criticized for having announced insufficient support.

Italy and Spain have both used windfalls to fund a combination of benefits for households in need and limits on bills that rise to unaffordable levels.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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