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UK Energy Bills Set to Rise 10% in October in Blow to Households - BLOOMBERG
(Bloomberg) -- The UK’s energy price cap will rise 10% in October, pushing up bills for millions of homes just as the winter heating season begins.
The level will increase to £1,717 ($2,251) from Oct. 1, according to figures released Friday, and is driven by higher power and gas prices in wholesale markets. Price caps are revised every three months by the regulator Ofgem.
Chancellor of the Exchequer Rachel Reeves is likely to face criticism as the bill increase coincides with new rules limiting the number of pensioners eligible for heating subsidies in winter. The cap, which represents an annual bill for a typical household, is expected to rise again by about 3% in January, according to Cornwall Insight Ltd.
That would mean two consecutive hikes - making it even harder for the new government to fulfill the election promise to lower bills. Soaring energy tariffs have been a driver of inflation and the cost of living crisis in Britain, a key issue for voters in the July General Election.
“The rise in the price cap is a direct result of the failed energy policy we inherited, which has left our country at the mercy of international gas markets,” Secretary of State for Energy Security and Net Zero Ed Miliband said in a statement.
Prime Minister Keir Starmer has presented the new state-owned energy company, Great British Energy, as a solution for lowering bills by investing in renewable energy supply. But, building new infrastructure isn’t a quick fix and it could take years for the benefit to be felt.
The Bank of England expects inflation to accelerate this year. After falling to the 2% target over the summer, it is now forecast by the BOE to reach 2.7% by the end of 2024 before easing again.
Energy poverty charities have been sounding the alarm since Reeves announced that some pensioners will miss out on a subsidy known as the Winter Fuel Payment, with only those on means-tested benefits being able to claim.
A report from influential charity Citizens Advice found that a 10% increase in the price cap would mean an estimated 25% of UK residents would consider turning off their heating and hot water this winter. Debt levels among customers are still at record levels according to Ofgem, despite bills dropping from the peaks seen during the energy crisis.
Quarter of UK Residents Face Turning Off Heat in Winter: Survey
The latest increase is mostly due to higher futures contracts amid supply risks because of the war in Ukraine and tension in the Middle East. UK gas contracts have increased more than 8% since the previous price cap came into force on July 1.
“It would be unrealistic to expect the market to simply correct itself and return to pre-crisis price levels, especially as bills remain far from historic norms three years on,” said Craig Lowrey, principal consultant at Cornwall Insight.
--With assistance from Andrew Atkinson.
(Updates with reaction from fifth paragraph.)
