From October 1st, the domestic energy price cap in Great Britain will increase by £1,755. This very significant increase will be a significant increase for households across the country. This change will raise the annual energy bills for the average household by more than £600. This marks a dramatic reversal from prior to Russia’s invasion of Ukraine in 2022. Most families have already been hit hard by financial distress. By the end of last winter, household energy debts reached a new nadir of £4.15 billion.
Energy bills are likely to go up significantly in the near future for a number of reasons. Another important measure is the expansion of the government’s warm home discount scheme. The Environmental Audit Committee estimates that this initiative will contribute around £15 to a typical household bill. Alongside this, the energy price cap will see an increase equivalent to just over £35 annually for the average home. These changes will be felt first and most acutely by the roughly 9 million households that rely on variable tariffs for their energy. They’ll see the impact immediately.
Ofgem, the energy regulator, announced that it will increase the cap on gas and electricity charges from October. The raised price cap will likely renew debates about energy affordability in the UK. This is particularly concerning as millions of households are already struggling with the cost-of-living crisis. Unpaid energy bills and arrears have skyrocketed in the last two years. This trend underscores a growing financial strain on consumers.
This new announcement follows a short summer break from the constant drumbeat of bad news. Within that period, the energy price cap fell by 7% to £1,720 due to plummeting market prices. Wholesale gas prices are still much higher – about 75% over the prices last seen before the Ukraine conflict started. This follows speculation from experts at Cornwall Insight that the price cap will fall slightly in January. This would be heavily contingent on favorable weather trends and positive geopolitical breakthroughs.
“Energy bills soared under the Conservatives because they tied our country to the fossil fuel rollercoaster and working people are still paying the price,” – Labour spokesperson.
The effects of these climbing costs are likely to be widespread and disproportionately imposed on lower-income populations. Families operating on slender margins have the further difficulty of juggling energy costs along with all their other necessary spending. We welcome the expansion of the warm home discount scheme to help more vulnerable households. Critics say we should do more and adopt more systemic reforms to address the fundamental reasons we’re experiencing higher energy prices.
“From banning onshore wind to failing to deliver new nuclear, their reckless decisions left Britain exposed to wholesale gas prices that are still 75% higher than before Putin’s invasion of Ukraine,” – Labour spokesperson.
As autumn draws near, millions of UK families need to start preparing for increased energy bills. Especially as they continue to make their way through unprecedented economic uncertainty. Industry analysts are sounding the alarm that consumers will continue to suffer from energy affordability. They recognize that bold policy changes and a transition to renewable energy are key to addressing these challenges.