Ofgem hikes UK energy cap
UK regulator Ofgem confirmed August 26 that from October 1 the energy price cap for delivering electricity and gas to the average UK household will reach £3,549/yr, up 80% from April, amid soaring European gas prices.
Ofgem said it was left little choice given the pressure on margins at UK suppliers over the past year, with utilities unable to afford service provision for "less than they have paid for it".
As the UK's morning news bulletins contemplated the cap increase, Ofgem CEO Jonathan Brearley conceded the news would be "extremely worrying" for vulnerable customers. To avoid wholesale costs again spiralling out of control, Ofgem has been given new powers to increase or reduce the price cap more frequently than the typical 6-month interval.
This could occur if, for instance, Russia's Gazprom cuts off gas supply to continental Europe, which would have a knock-on effect on UK wholesale gas prices.
The nation's Labour opposition has vowed to bring in new windfall taxes on industry profits, aimed at countering the anticipated cost-of-living fallout this winter. It wants the government to bring forward an emergency budget to address pressure on households and businesses.
Speaking on behalf of the government, chancellor of the exchequer Nadhim Zahawi promised to "do more" as the help on offer was "not enough". It is unclear whether Zahawi will stay in position once the UK's next prime minister takes office in early September.
Soaring energy bills were contrasted by UK public broadcaster the BBC to a more modest 4% rise in France, where bills have been frozen at their current levels for the remainder of this year. Paris is less afraid of state interventions, the BBC suggested, though this could well come at a long-term cost given its recent pledge to wholly nationalise French energy supplier EDF.
Ofgem's Brearley said: "The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas. “Ofgem is working to stabilise the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future."