The Ofgem regulator concedes that the record increase will be “devastating” for Britain’s hard-pressed consumers and calls on the incoming prime minister to take “immediate and decisive action.”
As a result of the price cap increase to £3,549 per year, the energy bills of millions of households will skyrocket, plunging many into financial hardship.
The unprecedented 80% increase in October, reported by the regulator Ofgem, will result in an average default tariff customer paying an additional £1,578 per year, highlighting the escalating cost of living crisis.
The increase followed a 54% increase in April, which caused annual average costs to grow to $1,971.
Meanwhile, the average annual bill for 4.5 million prepayment meter customers, who are frequently the most vulnerable and are already experiencing fuel poverty, will rise to £3,608.
Approximately 24 million households will be affected by the price increase.
Analysts at Cornwall Insight predict that the average monthly bill will reach £5,386 in January and £6,616 in April of next year, as a result of soaring wholesale gas costs, which have been fueled by Russia’s invasion of Ukraine.
It increases the pressure on people already struggling with rising food and gasoline costs.
One-third of households are already struggling to pay their energy bills, and the managing director of energy giant EDF predicts that by January, half of the British households will be in fuel poverty.
The price cap is set per unit of energy consumed, with the increase determined based on an “average” household’s energy consumption; therefore, consumers that consume more energy will pay more.
The Chancellor of the United Kingdom, Nadhim Zahawi, has acknowledged that the escalating cost of energy will cause “stress and concern” for many people but said that “help is on the way” from the government.
Jonathan Brearley, chief executive officer of Ofgem, told, “I speak with consumers daily, and I am aware that this will be sad news for a great number of people.”
After COVID last year, many economies grew, especially in Asia, and this has already put pressure on the natural gas market. As we observed, prices began to rise in September of last year.
“This year, on top of that, we have witnessed an intentional and creeping cutoff of gas by Russia to the European market. And this has caused costs to skyrocket substantially further.
“When I look at the gas prices for this winter, they are 15 times what they usually are. If this were to occur with gasoline, filling up our automobile would cost between £400 and £500.
“Therefore, the cost of energy is ultimately changing dramatically. And hence, the price ceiling must be revised. This is why we are bringing the extremely unfortunate news that the price will increase to £3,549.”
The head of Ofgem stated, “This is a significant problem.”
He continued, “This is a significant issue for customers. In ten days, there will be a new administration, a new prime minister, and a new cabinet.
“And what we are saying to them today is that we will need to work with you and the industry and NGOs (non-governmental organizations) and that swift and decisive action will be required to address this issue.
“The bad news we have today is that when I look ahead to winter and the following year, I see ongoing high price inflation.” Therefore, we must all work together.”
The significant increase will also contribute to inflation, which the Bank of England predicts will reach 13% in the fall, after reaching a 40-year high of 10.1% in July.
It increases the potential of a further hike in interest rates, adding to the financial strain on many struggling people.
Before the upcoming increase in costs, there were already widespread requests for the government to provide aid to help people cope with the cost crisis, and these calls will only increase.
All households have been guaranteed £400, with extra for the most disadvantaged, but the new increase will dwarf this amount.
Labour, the Liberal Democrats, and the majority of major energy suppliers have advocated freezing prices at current levels to alleviate the immediate burden on people.
However, Boris Johnson has emphasized that he will defer important decisions regarding extra support to his successor, who will not be named until September 5 following the conclusion of the Tory leadership contest.
Before the rise, frontrunner Liz Truss stated that, if the elected prime minister, she would utilize an emergency budget to “guarantee support is on the way.”
Rishi Sunak, her opponent, has offered more targeted support and the elimination of VAT from energy prices.
Keith Anderson, chief executive officer of ScottishPower, stated, “The breadth and scope of this problem are truly disastrous for UK families, which is why only a large-scale solution can solve it once and for all to protect people from the worst of winter.
Adam Scorer, chief executive officer of the fuel poverty charity National Energy Action, told, “This is a problem with our society’s weakest households facing Armageddon this winter.
“Only the government can ensure that this winter and the following winter will not be catastrophic.”
End Fuel Poverty Coalition coordinator Simon Francis stated, “Today’s Ofgem price increase is like a dagger to the heart of millions of people across the country.
Which? a consumer advocacy organization, has urged the government to increase its discount on energy bills by at least 150% or risk putting millions of people into financial hardship.
