The government’s energy regulator, Ofgem, said on Thursday the price many British households pay for heat and electricity will rise by 54 per cent in April. The jump was largely driven by natural gas prices. However, there is a global spike, which is expected to exacerbate concerns about inflation and the cost of living in the UK.
The regulator said that for customers paying by direct debit from their bank account, the annual fee will increase by £693 ($940) to £1,971. The massive increase will affect around 22 million customers currently buying energy below the price cap set by the regulator.
Ofgem said natural gas prices, which hit a record in December and remain high, fueled the rise. The regulator reviews the market twice a year and allows energy suppliers to pass on costs such as rising gas prices, a major source of electricity generation, to consumers.
Jonathan Brearley, Ofgem’s chief executive, said: “We know this increase will be extremely worrying for many people, especially those who are already struggling to make ends meet.”
Rising energy prices have become a major political issue in many countries, particularly in Europe, with governments scrambling to find ways to ease the pain and avoid a backlash from voters. Rising prices are also a threat to efforts to reduce carbon emissions, with some lawmakers calling for the elimination of so-called green tariffs, extra charges added to bills in the UK. and elsewhere to help pay for wind, solar and other clean energy.
High natural gas prices have also led to a shake-up among utility companies. According to Ofgem, 29 companies with 4.3 million customers went bankrupt or left the market in the last year. Many of these companies are relatively small, and wiping out the sector has led to criticism that Ofgem has been too lax in its financial requirements for energy suppliers. Consumers will have to pay some of the costs that companies incur when reaching customers of unsuccessful competitors.
According to Ofgem, electricity generation costs such as gas purchases will account for more than half of new energy bills, while green tariffs will amount to around 8%.
On Thursday, shortly after the regulator’s announcement, the UK government said it would allocate £9.1 billion to help consumers settle their bills. Among the measures, customers will receive a £200 discount on bills starting in October. The amount will be recovered over the next five years when, the government expects, lower costs.
For critics, these measures have been unsuccessful. Martin Young, an analyst at Investec, an investment bank, said that natural gas futures suggest that bills may need to rise again to around £2,300 in October, negating support. government.
Greenpeace UK, the environmental group, said government support was “very little for the poorest households and not enough to target those who need them most”.
Greenpeace is calling for new taxes on the profits oil companies are making from the boom in prices to fund more consumer relief.
https://www.nytimes.com/2022/02/03/business/uk-energy-prices-bills-rise.html UK energy bills to increase by 54% in April