Centre for Energy Policy response to Ofgem announcement on energy price cap rise
Ofgem have announced an increase in unit default tariff rates of electricity, rising from £0.28 per kWh to £0.52 per kWh (with daily standing charge rising from £0.45 to £0.46), and of gas, rising from £0.07 per kWh to £0.15 per kWh (with daily standing charge rising from £0.27 to £0.28). These increases will take effect on 1 October, and will translate to an 80% increase in the average annual UK household energy bill, rising from £1,971 to £3,549. This follows a 12% increase in the energy price cap last October and a further 54% in April. Analysts from Cornwall Insights predict that prices will continue to spiral, revising their forecast for the January energy price cap and suggesting average annual bills will rise to £5,386.
In response this price cap announcement, Professor Karen Turner, CEP Director said:
“This is largely anticipated but very unwelcome news. The impacts will be immediate and lasting through the winter on all UK households, and particularly drastic and damaging on those having to balance and manage low incomes. Thus, an immediate policy response and emergency action is required, which should involve seriously considering calls to freeze the price cap at the current level rather than allow the one announced today to take effect.
However, there are real challenges in terms of how a freeze could be paid for and what the implications may be going forward. Urgent attention is required to make more fully transparent the various factors actually driving the increases in energy bills, and to identify which of these can be affected, how and by whom.
Policy action cannot stop at managing impacts on households covered by the price cap. It must focus on controlling price increases and the impacts on the wider cost of living. Here, action must extend beyond the reach of the energy price cap, to support ALL households and ALL heating fuels, to charities and other organisations taking care of people. It must also extend to address the challenges of businesses, who have had to reflect energy cost increases in their prices, because this affects everyone through impacts on inflation and the cost-of-living, wages and employment”.