Energy price cap rises to three-year high
Brits are set for another squeeze from energy bills this winter after watchdog Ofgem confirmed the price cap was set to rise to a three-year high.
The regulator said on Wednesday the default tariff for consumers across Britain would increase four per cent to £1,723 for the final quarter of the year. The rise marks a £60 per year jump, or £5 per month.
It follows a sharp 13 per cent jump in the cap for the previous quarter.
Ofgem said the increase was mainly driven by the continued conflict in the Middle East, which has sent gas and oil prices surging. Brent crude – the international benchmark for oil – tipped over $110 at the height of the war and has remained above $85 per barrel for the last month. At the beginning of the year, it was trading around the $60 mark.
The watchdog said the extreme weather across Britain and Europe had also had an impact driving up power demand and restricting generation.
The price cap acts as a buffer for some 22m British households on default tariffs by limiting the maximum rates and standing charges an energy supplier can hit consumers with. The latest jump will pile more pressure on Prime Minister Andy Burnham after he pledged to give households some “breathing room” as he took the keys to Downing Street last month.
Burnham faces pressure to provide energy relief
In one of his first acts in No.10, Burnham unveiled plans for VAT to be removed from domestic electricity bills starting from October.
Reacting to the Ofgem’s update, the government said it would look at what more it can do “to protect families from unaffordable bills”.
Energy secretary Miatta Fahnbulleh said: “Families will be understandably concerned about the cost of energy bills this winter, which is being driven up by the Iran war.”
Economists have suggested the headline rate of inflation is set to jump in the latter months of the year as energy prices continue to rise.
Last week, official figures showed inflation leaped to 2.9 per cent for the 12 months to July after the energy price cap reset. It marked a hefty jump from the previous month’s reading of 2.6 per cent.
“The prices of raw materials and goods leaving factories slowed again, driven by a drop of crude oil and refined petroleum respectively,” the Office for National Statistics said at the time.
Experts at Cornwall Insight are warning the latest rise in the energy price cap won’t be the last. Another nine per cent jump is forecast for January in a move that will mount pressure on Burnham to provide further relief for Brits.
Craig Lowrey, principal consultant at Cornwall Insight, said: “Households will see rising energy bills going into winter, with the risk that, unfortunately, January will bring even more hardship.
“What is frustrating is these rises, as we have seen time and time again, have very little to do with what is happening in Britain.”