A decision by Britain’s energy regulator to pass on wholesale gas and electricity price rises more quickly to consumers has been attacked by fuel poverty advocates, as industry experts warn they could push household bills to more than £4,200.
Ofgem, the energy regulator, confirmed on Thursday that the energy price cap will change every three months instead of twice a year.
But analysts at Investec said the changes to how the price cap is calculated could increase average household bills by £500 in January, when they could reach £4,210 a year. Before the changes, Investec calculated that notes under the price cap would reach around £3,725 in January, compared with £1,971 today.
“Ofgem effectively allows companies to charge a more realistic price that is more reflective of the cost of supplying electricity and gas,” said Martin Young at Investec.
“But the pressure on strained households will only intensify.”
The energy regulator insisted the changes were needed to prevent another major crisis in the energy retail sector following the collapse of more than 30 suppliers since January 2021 amid rising wholesale prices. Consumers were Pay for the costs of rescuing customers of failing suppliers through their energy bills.
Ofgam did not immediately respond to a request for comment on Investec’s calculation of the height of the price ceiling.
But the decision has deeply angered fuel poverty advocates, who argue that the current system – whereby the cap changes only twice a year on April 1 and October 1 – has protected households from the worst wholesale price rises during the critical winter gas season. Usage is skyrocketing.
the regulator, Strong criticism For allowing too many low-capitalization companies to enter the market in recent years, he has been accused of siding with energy groups rather than consumers. Its consumer research showed that households were resistant to another price ceiling increase this January.
Ofgem On Thursday it confirmed other changes to the price cap – which dictates bills for 24 million households – which it said would add around £60 to the average bill between October and December. They included an adjustment to ensure that companies could recover the full costs of buying energy for the coming winter at very high prices.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, branded the move to quarterly cap changes “simply inhumane” and claimed it would force more people into fuel poverty in the middle of winter.
Caroline Abrahams, charity director at Age UK, called the decision “a hammer blow” which “poses a huge threat to the health and wellbeing of vulnerable older households across the UK”.
Analysts warned that the price cap, which dictates a maximum price suppliers can charge for a unit of energy and limits their profit margins, could rise 70 percent in October to nearly £3,360 a year per household before rising again in January.
Ofgem will approve the October price changes on August 26, but energy companies and consumer groups have already called on the government to do so provide more support for households with cash.
Jonathan Brierley, chief executive of Ofgem, admitted the situation was “very worrying for many people”, but insisted the changes “ensure that the price cap does its job, making sure that customers only pay the true cost of their energy, but also that it can adapt to the current volatile market.”
The regulator emphasized that the changes will also lead to decreases in wholesale prices that will be passed on to households more quickly.
Businesses are not covered by the price cap and negotiate customized fixed-term contracts with suppliers. But analysts warned that many companies’ bills could increase fivefold from October, when many commercial energy contracts expire.
Labor has accused the government of being “asleep at the wheel” over energy costs. “Millions of families are facing a cost of living catastrophe this winter,” said Alan Whitehead, shadow energy minister.
The Department for Business, Energy and Industrial Strategy said it recognized the “pressures people face with rising costs” and was already providing assistance, including a £400 discount on all household energy bills this winter.
Additional reporting by Jasmine Cameron-Chilsha in London
Ofgem’s move to alter UK energy price cap criticised by campaigners Source link Ofgem’s move to alter UK energy price cap criticised by campaigners