Electricity and gas prices in the UK soared this spring after regulator Ofgem revised its energy price cap.
The cap, which sets the maximum amount a utility company can charge an average customer in the UK per year, has risen dramatically by 54% from £1,277 to £1,971.
This means an increase of £693 per year for the average customer.
Worse still, the regulator’s chief executive, Jonathan Brearley, has since told the House of Commons Business, Energy and Industrial Strategy Committee that he expects the cap to rise again in October, placing it ” in the region of £2,800″.
In response to rising wholesale gas prices around the world, driven by increased demand and reduced imports to Europe, the revision implemented on 1 April 2022 potentially puts up to 22 million households facing her and unable to meet their commitments.
Chancellor Rishi Sunak has so far announced £150 Council Tax rebates will be given to homes in Bands A-D and as well as plans to offer a £200 bill rebate.
A government-backed loan scheme of this order will cost around £5-6billion, well below the £20billion demanded by the energy industry, which was highly critical of the announcements .
Ecotricity boss Dale Vince called the measures “far too little, far too late”.
Responding to the Commons, Labour’s shadow Chancellor Rachel Reeves also called Mr Sunak’s plans a ‘buy it now, pay later scheme which drives up costs for tomorrow’.
The Chancellor is now set to announce billions of pounds in extra help for struggling people who have previously expressed reluctance, only to have their hand forced by the worsening crisis.
How much do energy bills increase?
As of April 1, households currently on a standard variable rate saw their bills rise sharply by 54% to £1,971.
For around 4 million customers using prepaid meters, there was an increase of £708 from £1,309 to £2,017.
The new cap announced was calculated by Ofgem using a formula based on market prices and expected costs to suppliers.
As Mr. Brearley indicated, it could rise sharply again in October.
What if I’m not on a standard variable rate?
Previously, people looking and deviating from standard variable tariffs could find deals for hundreds of pounds cheaper than the energy price cap.
These agreements have now all been withdrawn as the cost of energy supply has increased.
When fixed-term agreements expire, customers will transition to a standard variable rate at the price cap level.
The option to shop around is still available, but other deals will be more expensive, so customers are currently advised not to switch.
What alternative measures have been proposed?
Exceptional tax on energy companies
Labor is pushing the government to introduce a one-off tax on North Sea oil and gas producers, who are among those who have benefited from steep price rises this year.
Labor estimates the levy could raise £1.2billion for the Treasury, which could be used to help people struggling with the rising cost of living, although that figure is only a small fraction of the additional costs Britons will face this year.
The Chancellor had been cold to the idea but, according to The temperaturenow seeks to introduce a much broader tax on energy producers, including wind farm operators, who have benefited from high prices.
Energy UK, the trade body for suppliers, has previously called for VAT to be reduced from 5% to zero on household bills.
Companies pay 20% VAT on their energy bills and the government offers a rate of 5% to companies that use a limited amount of electricity. Businesses are not protected by energy price caps.
But in last October’s budget, Sunak resisted calls to cut energy taxes. Whitehall officials said at the time the cut would be poorly targeted, helping people who could afford to pay as well as those who will struggle.
Suppliers have also requested levies that fund…
More about this article: Read More
This notice was published: 2022-06-27 16:44:51