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August 26, 2022

Billpayers struggle as UK winter energy tariffs rise by 80%

The UK’s energy regulator, Ofgem, will likely raise its tariff cap again in January.

By Matt Farmer

UK energy regulator Ofgem has announced its next energy tariff price cap, showing that energy bills may rise by 80% from October. Since January 2022, the tariff cap has now risen by 179%.

On Friday, Ofgem announced that the energy tariff price cap will rise to $3,549 per year for gas and electricity for an average household paying via direct debit from the start of October. Many energy businesses currently charge at approximately the rate of the cap, due to the high wholesale prices of gas. In its statement, Ofgem also said that “prices could get significantly worse through 2023”.

UK prices rise in line with mainland Europe, despite lower exposure

Alongside many analysts and utilities, Ofgem attributes the rise in energy bills to supply chain disruptions following the pandemic, as well as diminishing supply from Russia as a result of trade sanctions after the country invaded Ukraine. During June, the UK imported no Russian coal, gas, or oil.

Despite the UK’s lesser reliance on Russian energy, its bills have risen in line with many countries on the European mainland. The UK also has greater domestic oil and gas production than most other European nations. The UK’s oil and gas output increased by 26% in the first half of 2022, compared to the same period in 2021.

In 2021, UK electricity prices averaged £0.189/kWh ($0.22/kWh) but this will rise to approximately £0.52/kWh ($0.62/kWh) in the final quarter of 2022. In comparison, German energy costs have risen from €0.094/kWh in 2021, to pass €0.7/kWh ($0.7/kWh) in August 2022. France has managed to keep its energy costs down, but done so at the expense of state-controlled energy giant EDF. The energy crisis also contributed to the decision to fully nationalise the company.

Analyst predictions expect Ofgem to raise energy prices further in January

The UK government introduced the price cap in 2019, aiming to give financial security to those who do not wish to switch supplier. The cap prevents utilities from raising the prices of default tariffs far beyond wholesale costs. However, since 2021, wholesale costs have often risen faster than the tariff cap, forcing utilities into losses. This has resulted in the bankruptcy of 28 utilities since late 2021.

As a result of these bankruptcies, Ofgem announced that it would review its price cap methodology. Following the next update, the cap will now change every three months, although this means consumers should expect another price rise in December. However, the erratic movement of current energy prices means that the regulator “anticipates volatility in the forecasts”.

This announced rise remains in line with recent predictions from analysts, who in turn expect further rises in three months. Analyst firm Cornwall Insight predicted that the cap would reach £3,582 ($4,331) from October, before rising to approximately £4,266 ($5,158) from January.

“We need a plan: there must be a financial lifeline”

Opinion polling suggests that the overwhelming majority of British consumers expect the UK Government to take further action against rising bills.

However, the UK’s governing party remains reluctant to take action due to an ongoing internal leadership election. This will conclude next week.

Charity co-ordinator Citizens Advice has seen record numbers of people contacting them for help with bill payments. A statement said that more than 20% of British citizens will be unable to pay their bills at the tariff cap rate.

Responding to the announcement, chief executive of, Dame Clare Moriarty, said: ‘‘Without more support, the soundtrack to winter will be the beeping of emergency prepayment meter credit running out and the click of lights and appliances being turned off.

“We need a plan, not platitudes. Government support has to match the scale of this crisis, there must be a financial lifeline for those who need it most.”

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