Fri. Jan 21st, 2022


Millions of British households are facing further crippling increases in their electricity and gas bills next winter, with the latest projections suggesting that the energy price limit will almost double to £ 2,400 a year from October.

The calculation by energy consultant EnAppSys for the Financial Times emphasizes that the country is threatening cost of living crisis will probably be stretched as wholesale gas prices are still trading at historically high levels.

The price limit, which was set in 2019 to protect the accounts of about 15 million households that do not opt ​​for fixed-price transactions, will increase by more than 50 per cent in April to £ 2,000 per year from £ 1,277, based on average usage. .

Ofgem, the energy market regulator, sets the level of the limit twice a year with the next change after April’s term in October. Using the latest market prices, EnAppSys estimates that the limit could reach between £ 2,300 and £ 2,400 later this year, unless the government and regulator intervene to ease pressure on consumers.

Graph: Energy price limit will rise twice sharply in 2022

The cost of gas contracts for delivery later in 2022 has risen markedly over the past two months, implying that energy prices will remain high until next year.

A drop in gas supplies from Russia to Western Europe contributed to the initial rise in energy prices last summer and the pressure worsened in January.

Earlier this week, the head of the International Energy Agency accused Moscow of it suffocate gas supplies to Europe to use as leverage in the stand-off between NATO and Moscow over Ukraine. The market also responded to expectations that the approval of the Nord Stream 2 pipeline to Germany – which Russia has indicated is a condition of increasing sales to Europe – will be further delayed.

“EnAppSys is right, it’s not just a short-term problem,” says Philippe Commaret, managing director for clients at EDF Energy, Britain’s fourth largest energy provider. “Immediate customer support remains critical this winter and for the sharp rise expected this April, but the need for change does not stop there.”

Economists have warned of a looming cost of living crisis from April when the rise in energy bills will coincide with increases in national insurance and income taxes and inflation reaching its highest in a decade.

Ministers was to investigate mitigation measures including a 5 percent reduction in the value-added tax rate on energy bills, government-backed loans to suppliers so they can keep customers’ bills low, as well as more help for vulnerable households. A reduction in the so-called “green” levies on electricity bills, which subsidize renewable energy projects, is also being considered.

Ofgem will set the level of April’s price limit on 7 February.

The EnAppSys analysis is consistent with estimates from some energy providers shared privately with the FT. One senior source in the industry said that, based on current forward energy prices, the limit could reach £ 2,600 next winter.

Phil Hewitt, director at EnAppSys, warned that the wholesale pricing period used to calculate the pricing period from October still has “six months to run” and prices could fall during that time.

But he added that even if wholesale gas prices stabilize or fall, it “is likely to remain above historical levels”, meaning that household energy bills will still be at a “higher level” than consumers were used to.

The charity Age UK on Thursday warned that rising energy costs could cause a “national emergency” for older people and said many were already endangering their health by rationing of their heating.

Peter Smith of the National Energy Action fuel poverty charity said the EnAppSys analysis suggested that “without a proportionate and ambitious set of interventions [by government] the misery caused by cold houses can become the norm for years ”.

Dale Vince, founder of green energy provider Ecotricity, on Friday called for a public inquiry into the roots of the energy price crisis, blaming a combination of poor regulation and a lax approach to security of supply.

“The roots of this crisis need to be properly researched, to learn from mistakes and help rebuild the energy market to better protect ourselves from future shocks,” he said.



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