Cost of UK’s winter triples as energy price cap lifted to record

UK households will pay almost triple the price to heat their homes this winter compared with a year ago, a jarring increase for millions of people already struggling to afford everyday essentials.

Industry regulator Ofgem raised its cap on domestic energy bills to a record £3,549 (S$5,830) beginning Oct 1. That amount is expected to go even higher in January as the UK competes with other nations for limited gas supplies.

“An increase of this much cannot be budgeted for by households with no wiggle room,” said Peter Smith, director of policy and advocacy for the National Energy Action charity. “Come October, low-income households will simply not turn on their heating.”

The higher cap escalates the economic pressures on Britons paying increasingly more for everything from food to furniture. UK inflation hit a 40-year high last month, and Citigroup said it could surge past 18 per cent in January.

The government announced a £15 billion package of support in May, including £400 credits to all households and more for the poorest, but calls for further help remain unanswered during the Conservative Party’s ongoing leadership election.

Some energy suppliers are calling for a £100 billion fund to help stabilise prices and a rapid effort to insulate more homes, but a government spokesperson has said no major policy decisions will be taken until a new prime minister is installed Sept 5.

“It’s going to be horrendous,” said Bill Bullen, chief executive officer of Utilita Energy which supplies 810,000 homes in the UK. “We are going to see a big increase in people struggling to pay for their energy bills.”

The cap regulates how much suppliers can charge households per unit of energy and applies to about 24 million customers on variable tariffs. Annual bills for a normal household could reach £5,439 in January after the next adjustment, according to consultants Auxilione.

Last winter’s cap was £1,277, but that was before Europe became hostage to the worst energy supply crunch in decades following Russia’s invasion of Ukraine. The continent is dependent on gas from Russia, and Moscow is curbing deliveries in apparent retaliation for European Union sanctions.

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Wholesale energy prices are the largest component of the cap, and they’ve soared to a level more than 10 times higher than their seasonal average for the past five years. BLOOMBERG