UK household energy bills will jump 80% to over $4,000 a year

  • Price cap for 24 million households to increase from October
  • Even higher prices expected in January
  • Regulator calls for urgent government intervention
  • ‘This is a national emergency,’ says opposition Labor

LONDON, Aug 26 (Reuters) – Britain’s energy bills will jump 80% to an average of 3,549 pounds ($4,188) a year from October, the regulator said on Friday, plunging millions of households into fuel poverty and businesses at risk unless the government intervenes. in.

Ofgem CEO Jonathan Brearley said the rise would have a massive impact on households across Britain, and another rise was likely in January as Russia’s decision to limit European supplies makes push wholesale gas prices to record highs.

“It’s a disaster,” said Britain’s leading consumer rights advocate Martin Lewis, warning that people would die if they refused to cook or heat their homes this winter.

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Brearley said the government’s response must match the scale of the crisis with “urgent and decisive” action.

Prime Minister Boris Johnson, who has just two weeks left in office, said his successor would announce “additional cash” for the most vulnerable next month.

“But what I don’t think we should be doing is trying to cap it all for absolutely everyone, the wealthiest households in the country,” he told reporters.

In May, when price forecasts were significantly lower, the government announced a 400-pound ($472) discount on consumer bills for this winter.

The opposition Labor Party has said if it is in power it would freeze prices which could cost around £60billion a year – almost as much as the COVID pandemic furlough scheme.

The pressures are being felt across Europe, but in Britain, which is particularly dependent on gas, the price increases are breathtaking. Read more

An average annual bill of £1,277 last year will rise to £3,549 this year and leading forecaster Cornwall Insight said prices are likely to rise again in 2023.

He expects bills to peak in the second quarter at 6,616 pounds and households could pay around 500 pounds a month for energy in 2023, a sum higher than rent or mortgage for many.

The surge pushed inflation to its highest level in 40 years and the Bank of England warned of a long recession. Despite the bleak outlook, Britain’s response has been hampered by the race to replace Johnson which runs until September 5, driven by votes from Conservative Party members keen to cut taxes and spending.

A gas cooker is seen in Boroughbridge, northern England, November 13, 2012. REUTERS/Nigel Roddis

The two candidates – Foreign Secretary Liz Truss and former finance minister Rishi Sunak – have clashed over how to respond, with frontrunner Truss initially saying she would rather cut taxes than give “handouts”. “.

Both sides have acknowledged that the poorest in society will need support and the government went further on Friday saying households should look at how much energy they use – after previously saying people would know what to do.

‘NATIONAL EMERGENCY’

Labor said the country could wait no longer to act. “This is a national emergency,” said finance spokeswoman Rachel Reeves.

Truss and Sunak have suggested suspending environmental levies or cutting a sales tax – two ideas dismissed by analysts as far too little to soften the blow to household budgets.

Wholesale price increases are passed on to UK consumers through a price cap, calculated every three months, which was designed to prevent energy suppliers from making a profit, but is now the price the lowest available for 24 million households.

Such is the sector’s volatility that nearly 30 energy retailers have gone out of business and Ofgem said most domestic suppliers were not making a profit.

Supplier E.on said Britain should accelerate its gas phase-out and better insulate its Victorian building stock, while rival Scottish Power urged the government to set up a deficit fund to cut bills and split the cost over 10-15. period of the year.

Ofgem said customers unable to pay their bills would be offered affordable reimbursement plans by their supplier.

They would only be forced to switch to prepayment meters, which charge above-average tariffs, as a “last resort”, he said.

The market is too volatile to predict the next high for January, Ofgem said, but winter gas market conditions mean prices could worsen “significantly” through 2023.

($1 = 0.8463 pounds)

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Reporting by Paul Sandle and Kylie MacLellan; edited by Kate Holton, Jason Neely and Toby Chopra

Our standards: The Thomson Reuters Trust Principles.

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