Ofgem has confirmed an 80.06% rise in the energy price cap, sending the average household’s yearly bill from £1,971 to £3,549 from 1 October.
The cap will come into effect for around 24 million households in England, Scotland and Wales on default energy tariffs and will remain in place until 31 December, when it will be adjusted again.
The 4.5 million pre-payment meter customers, who are often the most vulnerable and already in fuel poverty, will see an even more punishing increase, with their average annual bill set to go up to £3,608.
Ofgem’s chief executive Jonathan Brearley warned of the hardship energy prices will cause this winter and urged the incoming Prime Minister and new Cabinet “to provide an additional and urgent response to continued surging energy prices”.
The regulator said the increase reflected the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the pandemic, and had been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.
Brearley said: “We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make - I talk to customers regularly and I know that today’s news will be very worrying for many.
“The price of energy has reached record levels driven by an aggressive economic act by the Russian state, they have slowly and deliberately turned off the gas supplies to Europe causing harm to our households, businesses and wider economy. Ofgem has no choice but to reflect these cost increases in the price cap.
“The UK Government support package is delivering help right now, but it’s clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year.”
Energy UK, which represents suppliers, said the charges its members will be forced to pass on to households will be “simply unaffordable”.
Its director of regulation Dan Alchin said bills of the size announced by Ofgem were unimaginable a few months ago and “we cannot expect customers to bear the brunt”.
Chancellor Nadhim Zahawi said the increase in the energy price cap would cause “stress and anxiety” for people, but that the government was working to develop more options to support households.
“I know the energy price cap announcement this morning will cause stress and anxiety for many people, but help is coming with £400 off energy bills for all, the second instalment of a £650 payment for vulnerable households, and £300 for all pensioners,” he said.
“While Putin is driving up energy prices in revenge for our support of Ukraine’s brave struggle for freedom, I am working flat-out to develop options for further support.
“This will mean the incoming Prime Minister can hit the ground running and deliver support to those who need it most, as soon as possible.”
The Scottish Chambers of Commerce called for urgent actions for the Scottish and UK governments to tackle the cost crisis and support businesses.
It has demanded that a Business Relief Package, at a similar level to that offered during the pandemic, be aligned with support offered to communities and households, as well as arguing for a moratorium on all policy measures that increase business costs for the remainder of this parliament, among other measures.
Energy Secretary Michael Matheson said: “This announcement from Ofgem of an average 80% increase on energy prices will only escalate the enormous strain upon the many thousands of households and businesses across the country who are already having to deal with April’s energy bill increases and wider cost of living pressures.
“Today’s price cap announcement and increase imposes a burden that customers simply cannot be expected to carry - the only acceptable course of action now is for the UK Government, who have the necessary policy levers and borrowing powers at their disposal, to take immediate steps to cancel the increase for all households.
“The Scottish Government is treating this situation as a public emergency and we will continue to do everything we can to mitigate the effects for consumers.
“To this end, the Scottish Government has prepared a £1.2m package to enable the immediate expansion of energy advice services to ensure households and businesses receive the support and guidance they need.”
Scottish Liberal Democrat leader Alex Cole-Hamilton said: “The only option is for energy prices to be frozen before these rises wreak havoc on our communities and for the Scottish Government to kickstart a national insulation programme before the cold of winter arrives.
“As millions suffer, the Conservatives and SNP do nothing, they have no plan and no idea how much pain these energy prices will cause our country.“
Scottish Labour leader Anas Sarwar said: “This eye-watering price hike risks plunging millions of people into fuel poverty.
“While energy giants are posting record profits, people are facing soaring bills - that’s why we need a windfall tax to put money in the pockets of consumers.
“And here in Scotland we need an emergency cost of living act to freeze rents, cut the cost of commuting and support businesses.”
ScottishPower chief executive Keith Anderson said: “The size and scale of this issue is truly catastrophic for UK households and that’s why only a big solution can tackle it once and for all to shelter people from the worst this winter.
“We have offered government a plan, backed by the industry, that can be delivered this year, tailored in line with their priorities and will support the UK economy - with the cap set at £3,549, what billpayers need now is to hear what additional help is coming.”
Philippe Commaret, the managing director of energy giant EDF, warned that half of UK households could be in fuel poverty in January as a result of rocketing prices, while Which? urged the government to raise its energy bills discount by at least 150% or risk pushing millions of people into financial distress.
The consumer watchdog said the government’s financial support for all households must increase from the current £400 to £1,000 – or from £67 to £167 per month from October to March.
However, no immediate extra help will be announced by Boris Johnson’s administration, with major financial decisions being postponed until either Liz Truss or Rishi Sunak is in No 10 after the Tory leadership contest.
Based on Wednesday’s gas prices, experts at consultancy Auxilione think the cap will reach £5,210 in January 2023 and £6,823 in April.
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