The UK’s household energy bills will rise by around 80% in October as the regulator lifts the limit on the amount suppliers can charge due to rising wholesale costs.
- Next week, Regulator Ofgem announces a new price cap
Consultancy Auxilione estimates bills will jump about 80%
This is according to the latest estimate by consultancy Auxilione. The average bill will be around £3,600 per year by the time the new level is announced next Wednesday for the three-month period beginning in October, up from £1,971, which came into effect in April.
This will replace £1,971, which was in effect in April.
The main reason for rising household bills has been the rally in natural gas prices in the past year. The UK’s wholesale gas prices rose more than 15% in the week ended and are now four times higher than they were one year ago. If this trend continues, bills may rise further next year, causing a crisis that could see millions of people living in fuel poverty, and forcing the next government into spending billions of pounds on support measures.
Rupert Harrison (portfolio manager at BlackRock Inc.) wrote that the UK and European power and gas prices continued to rise to really scary levels on Friday and posted this tweet. “The Government must act quickly to help households, particularly those with lower incomes, and possibly small businesses. It is difficult to overstate the magnitude of this shock.”
This week, British energy companies called on the government to do more for consumers who are struggling to pay their energy bills. The opposition Labour Party has requested a prompt recall of Parliament in order to address the crisis. They also want to freeze bills at their current levels until April.
Soon after Liz Truss or Rishi, the October increase will be in effect. Boris Johnson has pledged not to make major fiscal changes that could harm his successor. Truss and Sunak have expressed doubt about the opposition plan.
The cap set by Ofgem places a limit on how much energy suppliers can charge households. This is multiplied by the average annual energy consumption to get a figure showing how much typical households will pay for energy in a given year.
The wholesale energy prices for a given period are the main factors in determining the level. Thursday was the last day that Ofgem could include these market prices in its next calculation. This means that although there may be a slight variation, Auxilione’s estimate will likely be close to the October limit.
According to Auxilione, the October price limit is now at £3,576. This will continue to rise next year and reach a peak of £5,856 during the second quarter.