The rise in wholesale gas prices, fueled by Russia’s invasion of Ukraine, has pushed the price up, putting pressure on consumers already hardpressed.
Millions of households will be seeing their energy bills rise as the price cap increases to £3,549 per year. This could lead to financial hardship for many.
Ofgem announced a record 80% increase in October. This will result in a default tariff customer paying an additional £1,578, which exposes the growing cost-of-living crisis.
This rise is due to an increase of 54% in April which saw average bills jump to £1,971 per year.
The price rise will affect approximately 24 million households.
Jonathan Brearley, chief executive of Ofgem, stated that “We know the huge impact this price cap hike will have on British households and the difficult decisions consumers’ will now have to face.” I speak with customers often and know that today’s news is very concerning for many.
The Russian state’s aggressive economic policy has caused record energy prices to rise. They deliberately and slowly cut off gas supplies to Europe, causing damage to our homes, businesses, and the wider economy. Ofgem cannot help but reflect these price increases in its price cap.
“The scale of the crisis will dictate the response. We can overcome this crisis with the right support and cooperation from regulators, government, industry, and consumers.
The rising wholesale gas prices – fueled by Russia’s invasion of Ukraine – have pushed the energy price cap up, which is widely expected that it will spiral further next year.
This increases the pressure on households already struggling with rising fuel and food prices.
This will increase inflation further. The Bank of England forecasts that it will reach 13% in autumn. After already reaching a 40-year peak of 10.1% in July, the Bank of England has now predicted that the fall will see a sharp rise.
This increases the probability of an additional interest rate increase, increasing the cost burden for many households already struggling.
There were already widespread calls for government support to assist people with the cost crunch. These will only increase as the bill increases.
All households were promised £400 with additional support for the most vulnerable. However, this promise will be overshadowed by the recent rise.
The government announced its financial support package in May. In October, the energy price cap was expected to be around £2,800.
Responding to the price increase, Chancellor Nadhim Zhawi stated: “I understand that the energy price cap announcement today will cause stress and worry for many people. But help is coming with a £400 discount on energy bills for everyone, the second instalment of a £650 payment to vulnerable households, as well as £300 for all pensioners.
“While Putin is raising energy prices to retaliate for Ukraine’s brave struggle for independence, I am hard at work developing options for additional support.
“This will allow the incoming prime Minister to hit the ground running quickly and provide support to those most in need, as soon as they can.”
Rachel Reeves (his Labour counterpart) said that this was incredibly alarming and would cause fear in many families.
We cannot wait any longer to take action. This is a national emergency.
“The Tories should freeze energy bills immediately so that households don’t have to pay more for winter.”
Sir Ed Davey, Liberal Democrat leader, stated that “the only option is for energy prices not to rise before they wreak havoc in our communities.” We need to create a plan that will bring down bills next year.
“As millions suffer, the Conservatives do not do anything. There is no government policy, plan or strategy from Liz Truss and Rishi Sunak.
They don’t know how much our country will suffer from high energy prices. They are unfit to govern.”
