UK sees 80% jump in residential electricity bill to $4,000 a year

British energy bills will jump 80% to an average of $4,188 a year from October, the regulator said on Friday, plunging millions of homes into fuel poverty and putting businesses at risk unless the government intervene.

Ofgem CEO Jonathan Brearley said the increase would have a huge impact on households across the UK, and another increase is likely in January as Russia’s move to cut European supplies drove wholesale gas prices. to record levels.

“This is a catastrophe,” said the UK’s leading consumer rights advocate Martin Lewis, warning that people would die this winter if they refused to cook or heat their homes.

Brearley said the government’s response needs to match the scale of the crisis.

An opposition Labor Party proposal to freeze energy prices could cost around £60bn a year – almost as much as the license program implemented in the Covid pandemic.

Pressures are being felt across Europe, but in the UK, which is particularly dependent on gas, price increases are regrettable.

An average annual bill of £1,277 last year will hit £3,549 this year, and leading analytics house Cornwall Insight has said prices are likely to skyrocket again in 2023.

Cornwall Insight expects bills to peak in the second quarter at £6,616 and households will have to pay around £500 a month for energy next year, an amount higher than rent or mortgage for many.

The rise pushed inflation to a 40-year high and the Bank of England warned of a long recession. Despite the bleak outlook, the UK’s response has been hampered by the race to replace Prime Minister Boris Johnson, which runs until 5 September.

The two candidates — Foreign Secretary Liz Truss and former finance minister Rishi Sunak — have clashed over how to answer the question. Truss, a favorite in the race, initially said she would rather cut taxes than give “handouts”.

Both sides acknowledged that society’s poorest will need support and the government went further on Friday by saying that families should watch how much energy they use — after previously saying that people would know what to do.

“National Emergency”

Increases in wholesale energy prices are passed on to UK consumers through a price cap, calculated every three months.

The mechanism was designed to keep energy providers from making a profit, but it is now the lowest price available for 24 million homes.

The volatility has been so great that nearly 30 energy retailers have gone out of business, and Ofgem said most domestic energy suppliers were not making a profit.

Energy retailer E.on said the UK should accelerate its plan to reduce dependence on gas. Scottish Power urged the government to create a fund to keep the bills low and spread the cost over a period of 10 to 15 years.

Truss and Sunak have suggested suspending environmental fees or cutting a sales tax — proposals that have been rejected by analysts as too small to avoid impacting household budgets.

Finance Minister Nadhim Zahawi acknowledged that the price cap would cause stress and anxiety, and said help was on the way.

Ofgem said the market is too volatile to predict the next ceiling for January, but winter gas market conditions mean prices could get “significantly worse” through 2023.