The UK’s energy price cap will rise 10% in October, meaning millions of households will see higher electricity bills at the start of the winter heating season. The energy price cap will rise to £1,717 (about $2,251) from October 1, according to data released on Friday, driven by rising wholesale electricity and gas prices. The regulator Ofgem adjusts the price cap every three months.
Chancellor Rachel Reeves is likely to face criticism for new rules that limit the number of pensioners who can receive winter heating subsidies. The cap is typically equivalent to the annual bill for an average household, and prices are expected to rise again by about 3% by January, Cornwall Insight reported.
This is the second consecutive increase in electricity bills, making it more challenging for the new government to deliver on its campaign promise to lower electricity bills. The surge in energy bills has been a major factor driving Britain’s inflation and cost of living crisis, and became a focus of voters during the July general election.
The increase in the price cap is due to the failed energy policy we inherited, which has put the country in a passive position in the international gas market, said Miliband, the US Secretary of State for Energy Security and Net Zero Emissions, in a statement.
British Prime Minister Keir Starmer proposed that the newly formed state-owned energy company Great British Energy should provide a solution to lower electricity prices by investing in renewable energy supply. However, building new infrastructure will not be immediate and its benefits may take years to be seen.
The Bank of England expects inflation to accelerate this year. After lowering its inflation target to 2%, the bank now expects inflation to reach 2.7% by the end of 2024, and then it will be lowered again.
Energy poverty charities have begun to sound the alarm since Reeves announced that some pensioners will not be able to receive winter fuel subsidies. A report by the influential charity Citizens Advice shows that a 10% increase in the price cap means that about 25% of British residents may consider turning off heating and hot water this winter. Although bills have fallen from their peak during the energy crisis, Ofgem said that customer debt levels are still at record levels.
The recent price rise is mainly due to supply risks caused by the Russian-Ukrainian conflict and tensions in the Middle East, which have led to higher futures contract prices. Since the cap came into effect on July 1, UK gas contract prices have risen by more than 8%.
Craig Lowrey, chief consultant at Cornwall Insight, said: “It is unrealistic to expect the market to self-correct and return to pre-crisis price levels, especially considering that bills three years later are still well below historical standards.”
