More on bills:
- Latest update on Energy Price Cap
- How much will my utility bills cost in 2022?
- Government announces £400 additional household support to tackle bills
- Millions of UK households will receive £150 Council Tax rebate
- Broadband annual price increase 2022
- Energy Price Cap 2022: What is it and how will it affect me?
CEO of Ofgem, Jonathan Brearley has told MPs that the Energy Price Cap, which is currently at £1,971, will further increase to about £2,800 coming October. He also warned the number of people in fuel poverty could double.
New Price Cap in the region of £2,800
Brearley said, “I know this is a very distressing time for customers but I do need to be clear with this committee, with customers and with the government about the likely price implications for October. Therefore later today I will be writing to the Chancellor to give him our latest estimates of the price cap uplift.”
The increase was said to be “uncertain”, but likely “in the region of £2,800”. He also warned the global gas market could potentially worsen should there be interruptions in gas supply from Russia, which supplies about 40% of Europe’s natural gas.
“A once-in-a-generation event”
Although Europe is making plans to reduce its reliance on Russian supply by shifting to green energy and pipelines in other countries, it would at least take 8 years for the EU to be completely off Russian supply – meaning any sudden disruptions will still affect the global market considerably, ultimately affecting prices in the UK.
Ofgem described the current gas market situation as “genuinely a once-in-a-generation event not seen since the oil crisis of the 1970s”, and apologised for regulatory shortcomings.
Meanwhile, Chancellor Rishi Sunak has considered imposing a possible windfall tax on more than £10 billion of excess profits made by electricity generators, including wind farm operators, oil and gas producers.
Under his proposal, giant firms will pay a higher charge for a couple of years if energy wholesale prices remain high.
Big energy firms have been making huge profits amid soaring energy prices due to Russia’s invasion of Ukraine and energy shortages. Shell and BP reportedly made a profit of £7 billion and £5 billion this year respectively.
What is the Energy Price Cap?
Ofgem’s Energy Price Cap is the maximum amount a supplier is allowed to charge an “average user”. Its purpose is to protect consumers from expensive tariffs. The cap is reviewed twice yearly in August and February with any changes in the cap effective two months after the announcement.
The price cap is reviewed twice annually, in April and October. In last month’s review, the energy price cap jumped 54% from £1,277 to £1,971 per year, affecting 22 million homes across the UK.
Last week Ofgem revealed plans to adjust the price cap every three months instead of half a year – meaning there could be price reviews coming July and January. It is said a more regular review of energy prices “would reflect the most up to date and accurate energy prices and mean when prices fall from the current record highs, customers would see the benefit much sooner. “