26th Aug 2022 10:11
(Alliance News) - The UK energy regulator implored the UK government for more assistance, following its massive price cap hike on Friday, as many households across the country face the prospect of struggling to pay the bills this winter.
Ofgem on Friday said it will increase the annual energy price cap on default tariffs by 80%. From October 1, energy suppliers in Britain can charge up to GBP3,549 per year for energy bills, up from the previous cap of GBP1,971.
In August 2021, Ofgem set the price cap at GBP1,277 from October 2021, meaning the cap has nearly tripled over a one-year period.
The cap for households on prepayment meter bills will rise by 79% to GBP3,608 from GBP2,017. In August 2021, Ofgem set that cap from October 2021 at GBP1,309.
On Thursday, Centrica PLC's British Gas said it would be donating 10% of its profit made during the energy crisis towards grants for customers who are under pressure from rising energy bills. British Gas generated a pretax profit of GBP98 million for the first half of 2022, meaning that the initial contribution to the British Gas Energy Support Fund should be GBP9.8 million.
However, British Gas said it will increase its contribution to GBP12 million, to ensure that there is enough available for the winter, when energy usage will be at its highest. From then on, British Gas will contribute 10% of its interim profit to the fund, which will provide customers with grants expected to average GBP750 per household.
Ofgem regulates energy prices for England, Scotland and Wales, while Utility Regulator sets the price cap in Northern Ireland.
The increase comes after a survey from pollster Ipsos and Sky News from August 22 to 24 showed a third of UK households say they are already struggling to pay their energy bills, including 47% of households on an annual income of less than GBP20,000.
Ofgem said the increase reflects the "continued rise in global wholesale gas prices", which began to surge as the restrictions across the world eased from the Covid pandemic and have been driven higher to record levels by Russia "slowly switching off gas supplies to Europe".
The rise in the price cap comes as the UK regulator called for more support from the incoming UK prime minister.
Ofgem Chief Executive Officer Jonathan Brearley said: "The government support package is delivering help right now, but it's clear the new prime minister will need to act further to tackle the impact of the price rises that are coming in October and next year. We are working with ministers, consumer groups and industry on a set of options for the incoming prime minister that will require urgent action."
A new prime minister following a poll among most Conservative party members, either UK Foreign Secretary Liz Truss or former Chancellor Rishi Sunak, will be announced on Monday, September 5.
Truss, the frontrunner in the race for the keys to No.10, pledged "immediate support" to ease the sting of spiralling energy bills in the UK. Truss acknowledged the strain is "clear" at the checkout and the petrol pump, but insisted that Britain will "get through these tough times" - vowing to ensure help is "on its way".
Sunak's plan to cut VAT on household energy bills would save a typical household GBP51 between October and December at a cost of GBP1.4 billion, according to the Institute for Fiscal Studies.
Sam North, personal finance expert at eToro, said the energy price cap increase will be "devastating" for millions of families who are struggling during what is "the worst cost-of-living crisis in a generation".
North commented: "There is no getting away from the fact that some people will struggle to keep their homes light and warm this winter. What's worse is that the cost of energy has not risen in isolation: mortgage rates are at their highest levels in a decade, real wages are falling and the price of the weekly grocery shop has soared.
"Simply put, it means that we are about to become much poorer as a nation than we have been for years unless the government intervenes to alleviate some of the pressure."
By Arvind Bhunjun; [email protected]
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