“Price comparison”: Price cap increases average British energy bill by £12
Good morning and welcome to our live coverage of the economy and financial markets.
The British regulator Ofgem confirmed that energy Price cap rose 10% to £1,717.
Ofgem said the maximum price for the average dual-fuel tariff will rise from October 1. This will increase the normal heating bill by around 12 pounds.
Ofgem’s price cap sets a maximum rate per unit and standing charge that customers can be charged for their energy use, so the £1,717 figure is only a guide and households could pay more if they use more energy.
The regulator stated:
Rising prices on the international energy market – due to increasing geopolitical tensions and extreme weather events that intensify competition for gas – are the main cause of the increase, accounting for 82 percent of the price increase.
This comes against the backdrop of the Gaza crisis threatening to escalate into a larger war between Israel and Hezbollah in Lebanon, and the surprise incursion by Ukraine into Russian territory.
The price cap has effectively fixed prices for all households since the start of the energy crisis triggered by the war in Ukraine, but Ofgem advised consumers to “shop around” as some households may now be able to save money.
Jonathan BrearleyManaging Director of Ofgemsaid:
We know this price cap increase will be extremely difficult for many households. Anyone struggling to pay their bill should make sure they have access to all the benefits they are entitled to, particularly Pension Credit, and contact their energy supplier for further help and support.
I would also encourage people to shop around and see if there is a plan that works for them. There are options that can save you money while also giving you the security of a plan that won’t change for a set period of time.
Important events
The head of Ofgem has made it clear that there are no easy solutions to reducing energy costs – not even through a reform of standing charges.
Basic charges have increased in recent months and, unlike energy consumption, households have no opportunity to change their consumption.
Jonathan Brearley, OfgemThe CEO of , said:
We are working with government, suppliers, charities and consumer groups to do everything we can to support customers, including reforming longer term standing charges and taking steps to address debt and payment difficulties.
Options such as changing how standing charges are paid and requiring providers to offer more tariff options and give customers more control are all up for debate, but there is no silver bullet. Any change could leave some low-income households worse off, so it is important that we hear views on our proposals and continue to work with the Government to identify what targeted support could help customers.
Ultimately, the price increase we are announcing today is due to our dependence on a volatile global gas market that is too easily influenced by unforeseen international events and the actions of aggressive states. Building a domestic renewable energy system is key to reducing bills and creating a sustainable and secure market that works for customers.
The abolition of the basic charge could increase energy bills for 500,000 poorer households by 10%
The UK Energy Regulator has said that half a million low-income households would face a 10% increase in their energy bills if standing charges, which apply to all households regardless of whether they use any energy, were abolished.
Ofgem has announced options to change the much-criticised energy charges in the UK. Many people feel they are unfair because they apply even when households do not use energy.
The regulator stated:
Short-term options proposed by the regulator include the possibility of increasing the standing charge by £20 to £100 on top of the unit rate (the price per unit of energy used), giving customers the opportunity to save money by using less.
However, it was also said that some socially disadvantaged households could face higher bills if the standing charges were converted into unit energy costs.
While this option could mean savings for some households, Ofgem recognises the much greater impact of a unit rate increase on customers who cannot safely reduce their energy use because they depend on life-saving medical equipment or live in poorly insulated, low-standard housing. The regulator’s analysis of removing the standing charge and moving all costs to the unit rate also suggests that around half a million low-income households would face a bill increase of around 10 per cent.
The regulator is considering longer-term options, including eliminating standing charges, after two-thirds of the 30,000 respondents to the regulators’ survey said they were in favour of eliminating them.
Ofgem stated that there are “restrictions on the short-term reduction of standing charges”.
Monitoring by Thames Water will remain in place until creditworthiness improves
It was a busy morning for regulators of the British utility industry: The water regulator Ofwat also confirmed that the troubled water supplier Thames Water must appoint independent inspectors after violating its license conditions.
The water utility will not be allowed to lift the monitoring measures until it regains two investment-grade credit ratings – a requirement that suggests there is no end in sight to the monitoring period.
Rating agencies S&P and Moody’s downgraded Thames Water to junk status in July, meaning the company breached the terms of its license.
Ofwat also confirmed that Thames Water, which supplies water to large parts of south-east England and all of London, had committed to “taking the necessary steps to undertake a capital raising” and “developing and submitting an appropriate operational business plan to achieve the turnaround”.
In practice, it is unclear whether Thames will be able to meet these obligations in time to avoid a cash shortage.
Britain’s biggest water company, which is saddled with £15.2 billion in debt, has said it has enough cash to continue trading until at least May 2025. If it fails to secure new investment, it could be placed under special government-controlled administration.
“Price comparison”: Price cap increases average British energy bill by £12
Good morning and welcome to our live coverage of the economy and financial markets.
The British regulator Ofgem confirmed that energy Price cap rose 10% to £1,717.
Ofgem said the maximum price for the average dual-fuel tariff will rise from October 1. This will increase the normal heating bill by around 12 pounds.
Ofgem’s price cap sets a maximum rate per unit and standing charge that customers can be charged for their energy use, so the £1,717 figure is only a guide and households could pay more if they use more energy.
The regulator stated:
Rising prices on the international energy market – due to increasing geopolitical tensions and extreme weather events that intensify competition for gas – are the main cause of the increase, accounting for 82 percent of the price increase.
This comes against the backdrop of the Gaza crisis threatening to escalate into a larger war between Israel and Hezbollah in Lebanon, and the surprise incursion by Ukraine into Russian territory.
The price cap has effectively fixed prices for all households since the start of the energy crisis triggered by the war in Ukraine, but Ofgem advised consumers to “shop around” as some households may now be able to save money.
Jonathan BrearleyManaging Director of Ofgemsaid:
We know this price cap increase will be extremely difficult for many households. Anyone struggling to pay their bill should make sure they have access to all the benefits they are entitled to, particularly Pension Credit, and contact their energy supplier for further help and support.
I would also encourage people to shop around and see if there is a plan that works for them. There are options that can save you money while also giving you the security of a plan that won’t change for a set period of time.
