Energy prices in the UK are set to rise by 80% putting further pressure on households already staggering under cost of living crisis. The UK's energy regulator said on Friday it will increase its cap on consumer energy bills from an average £1,971 a year to £3,549.
Price caps limit what energy suppliers can charge customers for their electricity and gas bills in the UK. The rise follows a recalculation by Ofgem (the government office for gas and electricity markets) to reflect the changing market prices and industry costs.
The new price cap will apply to around 24 million households. The 4.5 million households on prepayment plans are now facing a rise from £2,017 to £3,608.
“This will be devastating for many families,” Jonathan Brearley, chief executive of Ofgem, told the BBC. Looking ahead to early next year, Brearley said, “the difficult news I have to give today is that prices look like they are continuing to rise.”
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Consumers in the UK and Europe are being hit by massive hikes in energy prices stoked by the war in Ukraine. Gas prices have risen to record levels throughout the year as demand has intensified even as supplies have dropped drastically due to a decrease in gas imports from Russia.
Earlier in August, Ofgem announced that it will recalculate the cap every three months instead of every six months due to the volatility in the current market.
Inflation in the UK rose to 10.1% last month, the fastest rise in 40 years. The Bank of England has said that inflation could peak at 13% in October, while a report from major financial services group Citibank had even more sombre predictions, saying the rate could go as high as 18% early next year.
Dealing with the cost of living crisis is a crucial issue in the UK and Europe. The British government has created a package of £400 to help residents with soaring bills. Politicians, think tanks, and campaign groups are calling on the government to do more to handle the energy and cost of living crises.
Beardley said that preventing the rise in energy prices was beyond the control of Ofgem, which is charged with protecting consumers from suppliers exploiting the situation. “The truth is this is beyond the capacity of the industry and the regulator to address,” he stressed.