UK to impose energy price caps for five years

The UK energy regulator announced on Wednesday (30) that it will impose limits on the price of electricity for the next five years in the country.

The Office of Gas and Electricity Markets (OFGEM) agency also stated that it will demand more investment from companies in clean operating processes to reduce the use of fossil fuels.

The measure will come into force in April 2023. To help with this process, the agency has offered a total of 3.59 billion pounds (about R$ 23.5 billion) in subsidies to the six energy distributors affected by the measure .

Companies, however, are already complaining about the imposition and must appeal the measure. They claim that the electricity price cap will affect their profits and, as a result, limit their ability to invest in the system.

The agency’s regulations justify the possible imposition of price controls in some circumstances because the industry is considered a “natural monopoly and therefore there is no realistic way to introduce industry-wide competition”.

At the moment, the United Kingdom, as well as several other countries in Europe, are experiencing a serious energy crisis caused mainly by the War in Ukraine. The conflict led to a decrease in the supply of Russian gas to the continent and a consequent increase in gas and electricity prices.

To make matters worse, the British are facing the highest inflation in 40 years, at 11.1% a year, with a severe impact on the population, unused to such a rapid decrease in its purchasing power.

As a result, several consumer rights organizations began to criticize what they consider “high profits” by energy companies in recent months.

OFGEM then decided to control prices – a measure that usually does not work in market economies, regulated by the law of supply and demand.