Millions of UK households will see their gas and electricity bills rise by more than 50 percent in April after energy regulator Ofgem announced a record increase in its price cap.
The cap, which sets a maximum amount providers can charge 22 million retail customers, will rise from £1,277 to £1,971 for average home use. That means an increase of £693 per year for the average customer.
Prepaid meter customers will see a £708 increase from £1,309 to £2,017.
Following the announcement, Rishi Sunak presented a support package that he said would “take the sting out” of the energy price crisis.
The “vast majority” of households would receive rebates totaling £350 this year, it said. All domestic energy customers will receive an initial £200 discount from October, off the full cost of the government meeting. Clients will pay the amount in installments of £40 over the next five years.
Households whose houses are classified A to D for council tax will receive a £150 discount on their tax bill in a bid to remove the ‘stinger’ of skyrocketing energy bills. Eligibility criteria for the £140 warm homes discount will be expanded to cover a third more people, Sunak said.
Suppliers and charities also called for more targeted support for those most in need, including a reversal of the recent universal credit cutoff.
Without financial help, some two million more people are forecast to sink into energy poverty this year, meaning that 6 million people in total would struggle to heat and light their homes.
Charities have warned of an “inevitable” rise in destitution as people on the lowest incomes are unable to afford other essentials such as adequate food and clothing.
Alison Garnham, executive director of the Child Poverty Action Group, said Mr. Sunak’s “piecemeal” measures would not protect low-income families.
“The increase in energy prices is only the beginning of the crisis and what is needed is comprehensive help with the widespread price increases.
“The most efficient way to help households is to increase benefits to match inflation and anything short of at least a percentage increase will leave families in dire straits.”
The turmoil in the international gas markets made a sharp increase in the price cap almost inevitable. Skyrocketing wholesale gas prices, fueled by surging demand in Asia and a lack of supply from Russia, have pushed wholesale prices to record highs in recent months.
A higher price cap will allow suppliers to pass on some of the high costs they are paying for gas.
Market prices indicate that consumers will suffer the most, and energy is expected to remain expensive for at least two years.
Experts forecast that the cap will rise again to more than £2,300 in October.
Households face increased pressure from rising Social Security contributions and rising interest rates. The Bank of England announced it had raised its key benchmark rate from 0.25% to 0.5% on Thursday, meaning higher payments for people with standard and tracking variable-rate mortgages.
Jonathan Brearley, chief executive of Ofgem, said: “We know this increase will be extremely worrying for many people, especially those struggling to make ends meet, and Ofgem will ensure that energy companies support their customers in any way they can. way they can.
“The energy market has been facing a major challenge due to the unprecedented increase in global gas prices, a unique event in 30 years, and Ofgem’s role as energy regulator is to ensure that, under the maximum price , energy companies can only charge a fair price based on the actual cost of supplying electricity and gas.
He added that Ofgem is working to stabilize the market and, in the long term, to “diversify our energy sources, which will help protect customers from similar price shocks in the future.”
Ofgem will announce new measures tomorrow aimed at increasing financial resilience in the energy market.
The regulator has been heavily criticized for allowing dozens of providers with limited experience and knowledge to enter the market and failing to ensure companies have adequate capital and are not taking excessive risk.
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.