LONDON — Britain’s energy regulator announced Friday it will raise its cap on consumer energy bills to an average £3,549 from £1,971 a year, as campaign groups, think tanks and politicians call on the government to tackle a cost-of-living- crisis.
The price cap limits the amount energy suppliers can charge domestic customers for their combined electricity and gas bill in England, Scotland and Wales, but is recalculated by Ofgem throughout the year to reflect wholesale market prices and other industry costs.
It covers around 24 million households. The 4.5 million households on prepayment plans face an increase from £2,017 to £3,608.
The cap does not apply in Northern Ireland, where suppliers can increase prices at any point after getting approval from a different regulator.
Gas prices have soared to record levels over the last year as higher global demand has been intensified in Europe by low gas storage levels and a drop in pipeline imports from Russia following its invasion of Ukraine. This has also increased electricity prices.
Earlier this month, Ofgem announced that it will recalculate the cap every three months rather than every six months to reflect current market volatility.
Consultancy Cornwall Insight forecasts the cap could rise to £4,649.72 in the first quarter of 2023 and to £5,341.08 in the second quarter before coming down slightly to £4,767.97 in the third quarter.
That is still up from an average £1,400 annual bill in October 2021, and the current £1,971 cap.
‘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 £650 one-off payment going to 8 million vulnerable households. Some suppliers have also announced support packages for customers.
However, this has been widely criticized for failing to address the scale of the problem, which has been compared with the Covid-19 pandemic and the 2008 financial crash in terms of its impact on the population.
“A catastrophe is coming this winter as soaring energy bills risk causing serious physical and financial damage to families across Britain,” said Jonny Marshall, senior economist at the Resolution Foundation think tank, ahead of the announcement.
“We are on course for thousands to see their energy cut off entirely, while millions will be unable to pay bills and build up unmanageable arrears.”
Several strategies for tackling the crisis have been put forward by politicians, consultancies and suppliers themselves, but the ongoing U.K. leadership election has meant no new policy announcements have been made despite the looming spike in bills.
The candidates, Liz Truss and Rishi Sunak, have both spoken of the need to provide additional support for households and businesses but said no decision will be made until the new prime minister is elected on Sept. 5.
At a leadership hustings Thursday night, Sunak said he would provide further “direct financial support” for…
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