Ofgem, the British energy regulator, stated that its price cap for household energy bills would increase by 21% to £4,279 ($5,172) per year from January 2023 to March 2023.
However, households will not have to pay this amount because Ofgem’s price limit has been replaced by a government-backed price promise of £2,500 per year for average consumption up until March 2023.
As Britain is facing what is likely to be a prolonged recession, government assistance was intended to provide financial relief to consumers.
The government’s action by Ofgem will help save households around £1,779 pounds per year, as compared to what they would have paid under the regulator’s cap.
Even with this help, the average bill for winter of 2,500 Pounds per year is near twice the amount households paid last season.
From April 1 to March 2024, the government price guarantee will rise on average to 3,000 pounds per year.
Cornwall Insights analysts predict that the new Ofgem cap level will mean that the total cost for the government scheme to reduce energy bills is expected at 38-42 Billion pounds in the next 18 months.
European energy prices rose as the world was liberated from COVID-19 lockdowns. They then surged in February after Russia’s invasion.
The result is that wholesale gas prices have risen and suppliers are now charging more per unit. This has prompted the government to intervene to assist consumers.
