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The National (Scotland)
The National (Scotland)
National
Xander Elliards

FM demands action as Ofgem raises energy price cap to 'unaffordable' £3549

First Minister Nicola Sturgeon called for 'fundamental reform' after Ofgem announced the energy price cap would rise by 80%. Photos: PA

OFGEM has confirmed an 80.06% rise in the energy price cap, sending the average household’s yearly bill from £1971 to £3549 from October.

First Minister Nicola Sturgeon said the “unaffordable” price rise could not be allowed to go ahead, calling for action from both the UK Government and energy providers.

The cap is due to come into effect for around 24 million households in England, Scotland and Wales on default energy tariffs on October 1, and will remain in place until December 31, when it will be adjusted again.

Money saving expert Martin Lewis, who predicted the price cap with extreme accuracy before its announcement, tweeted to explain the differing changes in bills depending on how they are paid.

He wrote: "New price cap rates for main payment types. (The brackets is impact on someone with 'typical use')

  • Direct Debit: Up 80% (up from £1971 to £3549/yr)
  • Prepayment: Up 79% (up from £2017 to £3608)
  • On receipt of bill: Up 79% (up from £2100 to £3764)"

Ofgem’s chief executive Jonathan Brearley warned of the hardship energy prices will cause this winter and echoed Sturgeon in urging the incoming prime minister and new Cabinet “to provide an additional and urgent response to continued surging energy prices”.

Sturgeon wrote on Twitter: “This is simply unaffordable for millions. It cannot be allowed to go ahead. This rise must be cancelled, with the UK Gov and energy companies then agreeing a package to fund the cost of a freeze over a longer period, coupled with fundamental reform of the energy market.”

Ofgem said the increase reflected the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic, and had been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.

The rise follows a spike of 54% which came into effect on April 1, and will only compound the inflation issues facing the UK, with one bank predicting it could hit 18%

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

“The price of energy has reached record levels driven by an aggressive economic act by the Russian state. They have slowly and deliberately turned off the gas supplies to Europe causing harm to our households, businesses and wider economy. Ofgem has no choice but to reflect these cost increases in the price cap.

“The Government support package is delivering help right now, but it’s clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year.

“We are working with ministers, consumer groups and industry on a set of options for the incoming Prime Minister that will require urgent action. The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, Government, industry and consumers working together, we can find a way through this.”

Fuel poverty charities immediately called on the Government to urgently extend the household support package announced in May – when the price cap was predicted to reach around £2800 in October – “to prevent the bleakest of winters”.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Today’s Ofgem price hike is like a dagger to the heart of millions of people up and down the country.

“As a result of the decision, parents will be unable to feed their children, the sick and elderly will be condemned to worsening health, disabled people will go without vital medical equipment and households will be forced into poverty for the first time in generations.

“All the solutions lie at the Westminster government’s door, yet it is silent in the face of this looming disaster.”

Philippe Commaret, the managing director of energy giant EDF, has warned that half of UK households could be in fuel poverty in January as a result of rocketing prices, while Which? has urged the Government to raise its energy bills discount by at least 150% or risk pushing millions of people into financial distress.

The consumer watchdog said the Government’s financial support for all households must increase from the current £400 to £1000 – or from £67 to £167 per month from October to March.

However, no immediate extra help will be announced by Boris Johnson’s Government, with major financial decisions being postponed until either Liz Truss or Rishi Sunak is in No 10 after the Tory leadership contest.

On Wednesday, Chancellor Nadhim Zahawi insisted “nothing is off the table” when it comes energy bills, but added that a freeze in the price cap would not deliver “targeted help” for those who need it most.

Based on Wednesday’s gas prices, experts at consultancy Auxilione think the cap will reach £5210 in January 2023 and £6823 in April.

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