UK nearly doubles energy price cap in cost-of-living crisis – AFR

Britain announced Friday a vast 80-percent hike in electricity and gas bills, in a dramatic worsening of the cost-of-living crisis before winter as the UK awaits a new leader.

Regulator Ofgem said its energy price cap, which sets prices for consumers who are not on a fixed deal with their supplier, will in October increase to an average £3,549 ($4,197) per year from the current £1,971, blaming soaring wholesale gas costs after Russia’s invasion of Ukraine.

“The increase (in the cap) reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe,” Ofgem said in a statement.

The news sparked outcry from charities who said families faced one of the “bleakest Christmases” for years, with UK inflation already in double-digits and forecast to strike 13 percent in the coming months due to runaway energy bills.

The near-doubling in the cap will likely tip millions into fuel poverty, forced to choose between heating or eating, according to anti-poverty experts.

Britain is already suffering from its highest inflation rate since 1982 and is predicted to enter recession later this year. 

“We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make,” added Ofgem boss Jonathan Brearley on Friday.

“I talk to customers regularly and I know that today’s news will be very worrying for many.”

Britain’s rampant cost-of-living has dominated the race to succeed Conservative Prime Minister Boris Johnson, with political opponents accusing him of leading a zombie government as inflation escalates.

Both front-runner Liz Truss and rival leadership contender Rishi Sunak are grappling with how to address the crisis.

Gas comprises a major part of Britain’s energy mix, with tens of millions of homes relying on gas-powered boilers for their heating.

Household and business consumers, energy suppliers and opposition politicians are clamouring for urgent government action to do more to avoid putting the most vulnerable in desperate situations.

The University of York has estimated 58 percent of UK households are at risk of fuel poverty by next year. 

The crisis is forecast to worsen from next January, when average bills could top £5,000 according to some projections as Ofgem updates the cap every three months, rather than the previous norm of twice a year. 

The leader of the main opposition Labour party, Keir Starmer, has called for a freeze in energy bills at the current cap level.

Outgoing premier Johnson has vowed to leave major fiscal decisions to his successor, who will be announced on September 5 following a summer-long leadership contest.