British energy bills about to skyrocket
People may have to pay twice as much for gas and electricity after the regulator lifts the cap on energy bills
The UK’s Office of Gas and Electricity Markets (Ofgem) is lifting the price cap for domestic energy bills by 54%, the regulator said in a press release on Thursday.
“The energy price cap will increase from 1 April for approximately 22 million customers. Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 ($2,670) per year,” the press release reads.
The energy price cap sets a maximum amount energy suppliers can charge customers for the gas and electricity they use. According to Ofgem, the cap “stops energy companies from making excessive profits, ensuring customers pay no more than a fair price for their energy.”
Ofgem sets the cap every six months based on the underlying costs to supply energy, with the previous rise in October hiking energy bills by 12% to an all-time high of £1,277 ($1,731) a year for around 15 million households.
Ofgem says the latest cap hike is made in response to a “record rise in global gas prices over the last 6 months, with wholesale prices quadrupling in the last year” and resulting in closures of dozens of utilities.
“Over the last year, 29 energy companies have exited the market or been put in special administration in the wake of soaring global gas prices, affecting around 4.3 million domestic customers,” the regulator states.
Ofgem expects the cap lift to affect default tariff customers, who haven’t yet switched to a fixed deal on energy consumption.
“This is because energy companies cannot afford to supply electricity and gas to their customers for less than they have paid for it,” the press release says. The regulator, however, noted that it is preparing other measures in order to tackle the worsening energy crisis, including changing the frequency of price cap updates “to ensure that it still reflects the true cost of supplying energy.”
UK consumers are already suffering from soaring prices on everything from energy to consumer goods as inflation races toward its fastest pace in three decades. Ofgem’s announcement also came mere hours before the Bank of England revealed a new interest-rate hike of 0.5%.
On the bright side, UK Chancellor of the Exchequer Rishi Sunak has just announced a package to help households pay their power bills, which will provide £350 ($476) to the “vast majority of households” to offset Ofgem’s cap hike. However, many experts say this will only cushion the impact, with social media users already dubbing Ofgem’s cap move “black Thursday.”
For more stories on economy & finance visit RT’s business section