Household energy bills have climbed to all-time highs for millions of Brits today, despite a Government cap on costs per unit.
The Energy Price Guarantee, unveiled by the Government last month, freezes energy bills at a rate of £2,500 per year for average.
The guarantee stays in place for the next two years.
This follows Ofgem announcing a massive 80 per cent hike in the energy price cap this summer, which would have seen bills rise on average from £1,971 per year to £3,549 per year from October.
The overall cost of the pledged support is dependent on wholesale costs, but is estimated to be as much as double the £70bn Covid furlough package.
The Government estimates the first six months of support for households and businesses will cost £60bn, which will be funded through borrowing.
Households will also receive the £400 discount unveiled by former Chancellor Rishi Sunak over the next six months.
Wholesale costs are heavily influenced by gas prices, which have spiked this year amid rebounding post-pandemic demand and fears of supply shortages following Russia’s invasion of Ukraine.
Costs had dipped in recent weeks with Europe successfully topping up gas storage to nearly 90 per cent ahead of winter, while expectations of a recession eased demand expectations.
Prices have since spiked following explosions across the Nord Stream pipelines, reflecting the volatile nature of the situation and the influence macro-factors can have on UK and Dutch benchmarks.
Energy bills expose tough winter ahead for households and businesses across the UK
Fuel poverty charity National Energy Action has warned today marks the beginning of a “bleak autumn and winter.”
Chief executive Adam Scorer warned that energy bills will be unaffordable for vulnerable households, even with the latest cap.
He said: “For millions on lowest incomes, a doubling of the cost of energy in a year has already exploded their household budgets and there is no prospect of relief.”
While households will receive support from today, businesses will have to wait another month for support, with the Energy Bills Relief Scheme not kicking in until October.
The support will last six months, and includes not just all UK businesses, but also charities and the public sector such as schools and hospitals.
The Government has set a supported wholesale price – expected to be £211 per MWh for electricity and £75 per MWh for gas – a strongly discounted price per unit of gas and electricity.
While suppliers will still pay far more their energy than last year, this is less than half the costs businesses were fearing this winter.
Tina McKenzie, policy chair at the Federation of Small Businesses called on the Government to act quickly when Parliament returns to ensure businesses are supported as soon as possible.
She said:“When Parliament returns, the Government must focus on bringing in all the legislation needed to ensure that both the energy support for businesses and the reversal of the National Insurance rise happen quickly. Bills and payroll costs must be eased with money arriving in small businesses in November, as they are expecting.”