UK Energy Bills to Rise, Despite New Price Cap and Falling Energy Costs

Facts

• UK households will see their energy bills increase by an average of 20% (£500) this coming year, despite energy regulator Ofgem having announced that the energy price cap — which sets the maximum that companies can charge for a single unit of energy — will be lowered for the three months from April 1, 2023.¹
• The average annual bill for a dual fuel household paying by direct debit is currently £2.5K and has been kept artificially low via the government's Energy Price Guarantee (EPG). Through the EPG, the UK Treasury has been subsidizing energy bills by paying energy companies the difference between the Ofgem Energy Price Cap level (currently set at £4,279 until Mar. 31, 2023) and the £2.5K figure.²
• Ofgem’s Energy Price Cap level is set to drop by £999 to £3,280 for the quarter starting 1 April. The regulator cited the decline in wholesale gas prices as the basis for its drop in the cap.³
• The average household will still see their annual bill increase by £500 to £3K a year, from Mar. 31 2023 to 31 Mar. 2024. This is because the UK government will be both reducing its EPG subsidy and eliminating its Energy Bills Support Scheme — a separate subsidy totaling £400 a year per household, which is automatically paid into people’s accounts to reduce energy costs.²
• “While consumers won't have to face typical bills of £3,280 this spring, many are still set to see bills rise by a fifth as government support is scaled back,' said Emily Fry, an economist at the Resolution Foundation think tank which focuses on improving the standard of living for people on low and middle incomes.⁴
• UK Treasury Minister Jeremy Hunt ruled out any further government support on Feb. 10, stating that he did not think the government had the “headroom to make a major new initiative to help people”.⁵

Sources: ¹Which?, ²Guardian, ³Inews.co.uk, ⁴BBC News (a) and ⁵BBC News (b).

Narratives

• Left narrative, as provided by Guardian. It is vital that the chancellor listens to campaigners and charities and continues support for vulnerable households in the midst of the ever-worsening cost-of-living crisis in the UK. Despite a decline in wholesale prices, energy companies are continuing to profiteer while ordinary Brits struggle to afford basic necessities. More government intervention must be undertaken to stop rising prices.
• Right narrative, as provided by The telegraph. Though the announcement that the price cap is decreasing may appear positive news, Ofgem is merely attempting to cover itself against criticism by suddenly embracing a socialist approach. Due to its previous failings to effectively preempt the market and, in some instances, failing to act at all on spiraling prices, the treasury was forced to intervene and subsidize Brits when costs spiked. This watchdog has done nothing to dampen the volatility of the market and its reactive stance over recent months has fueled unnecessary government deficit at a time when the UK economy cannot afford to expand state funding.
• Establishment-critical narrative, as provided by Tribunemag. Public ownership of energy is the only answer to this broken system. Privatization was justified on the basis that it would encourage competition, thereby lowering consumer prices. The opposite has proved to be true — energy companies are getting away with charging consumers grossly overinflated prices and making huge profits without any accountability. The shareholders (and the overpaid executives) must be taken out of the equation altogether for the public good.

Predictions