Energy Price Cap Could Rise Above £2,000 Early Next Year
An asset manager has predicted that the price cap on energy bills, set by regulator Ofgem, will rise back above £2,000 on January 1st, resulting in an 8% increase on current tariff levels. This is bad news for millions of families who are already facing the prospect of another expensive winter. As households rely more heavily on heating during this time of year, the price hike will place further strain on their budgets. Additionally, Chancellor Jeremy Hunt has warned that inflation is on the rise.
Ofgem sets price caps for energy suppliers, adjusting them every quarter according to the cost of gas and electricity on global markets. Last year, bills skyrocketed due to Russia’s invasion of Ukraine, which caused gas prices worldwide to surge. In order to prevent bills from rising even higher, the government allocated billions of pounds in subsidies. Although prices began to decrease in July as wholesale gas prices eased, they are expected to rise above £2,000 again for the highest consumption quarter of the year. Analyst Martin Young from Investec emphasized the volatility of these estimates, considering the unpredictable nature of market movements.
Indeed, inflation was at 11.1% last autumn and dropped to 6.8% in July, but the Treasury’s internal analysis suggests that it climbed to over 7% in August. In addition to rising energy costs, petrol prices have also surged, increasing by 7 pence per litre in the past month. This is one of the largest fuel price spikes seen in the last two decades. To address the energy crisis, the government plans to revise planning rules that impede the construction of onshore wind farms. The proposed changes would prevent a single individual from blocking wind farm projects and would require sufficient local support for their development.
Overall, the predicted increase in energy prices, coupled with rising inflation and fuel costs, is a cause for concern for UK households. It remains to be seen how the government will manage these challenges and alleviate the burden on consumers.
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