Extreme weather and geopolitics to send UK energy bills up 10%

Published : 1 month ago, on 23/08/2024

 

By Catarina Demony and Radhika Anilkumar

(Reuters) – British energy regulator Ofgem on Friday raised its price cap on household energy bills by 10% from Oct. 1 to an annual level of 1,717 pounds ($2,250.64), a jump blamed on severe weather events and conflicts such as the war in Ukraine.

“Ultimately the price rise we are announcing today is driven by our reliance on a volatile global gas market that is too easily influenced by unforeseen international events and the actions of aggressive states,” said Ofgem’s CEO Jonathan Brearley.

“We know that this rise in the price cap is going to be extremely difficult for many households,” Brearley said.

Friday’s rise of 10% for a typical dual-fuel household was slightly above analysts’ forecasts. Energy consultancy Cornwall Insight said on Monday the cap was expected to rise 9% due to gas and electricity wholesale market prices, which have rebounded over the past few months.

“While prices have stabilised somewhat compared to the previous two years, the market has not fully recovered from the energy crisis and the impact of Russia’s invasion of Ukraine,” the consultancy said.

Energy Secretary Ed Miliband said the rise was a direct result of what he described as a “failed energy policy” the Labour government had inherited from the Conservative Party.

He said the policy left the country “at the mercy of international gas markets controlled by dictators”.

Cornwall Insight said measures should be introduced to protect the vulnerable from rising energy bills, and that in the long term a shift towards sustainable, home-generated energy was needed to reduce Britain’s vulnerability to international shocks.

“While we don’t expect a return to the extreme prices of recent years, it’s unlikely bills will return to what was once considered normal,” said Craig Lowrey, from Cornwall Insight.

Britain introduced an energy price cap for consumers in 2019. The average cost hit a high of 4,279 pounds in January 2023 as Russia’s invasion of Ukraine sent shockwaves through energy markets.

Simon Francis, coordinator of the End Fuel Poverty Coalition, said energy bills remained 65% higher than before the crisis.

($1 = 0.7629 pounds)

 

(Reporting by Radhika Anilkumar in Bengaluru and Catarina Demony in London; Editing by Rashmi Aich and Kate Holton)