Energy price cap expected to fall – but bills will continue to rise
Ofgem is expected to announce that it will drop its cap on the amount energy suppliers can charge by around £1,000 – but bills could still rise by an average of £500.
According to the latest forecast from energy consultancy Cornwall Insight, the energy regulator is expected to announce a fall in the cap to around £3,295 for a typical household from April.
But customers are likely to pay 20% more – around £500 – because the government’s additional support (the energy price guarantee) only partially protects them from paying the full price cap.
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Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Regrettably, the forecast for April looks set to leave the price cap above the increased energy price guarantee level, meaning average annual consumer bills will effectively jump by 20% (£500).
“However, this is before we take into account the end of the £400 energy rebate scheme in March, meaning that the cost of energy for households will increase by even more.
“While tumbling cap projections are a positive, unfortunately already-stretched households will be seeing little benefit before July.
“While prices under the cap remain considerably higher than historic norms, the combination of falling wholesale prices and an increase in the EPG could see the return of competitive tariffs, and with it the chance for consumers to take back some control over their energy bills.”
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UK energy crisis
The government’s energy price guarantee limits the amount paid by domestic customers to 34p per kWh for electricity and 10.3p per kWh for gas – £2,500 a year for a typical household, although the exact total depends on your usage.
The government picks up the difference between Ofgem’s price cap and the guarantee but this support will be cut back from April, meaning the average bill rises to £3,000.
Ofgem’s price cap is currently £4,279 per year for the average household, meaning the government has been paying an average of about £1,779 per year to energy suppliers for every household between September and March.
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The predicted fall of the price cap to £3,295, and the rise of the energy price guarantee level to £3,000, means the government will be paying just £295 per household per year from April to June.
Cornwall Insight said it expects the price cap to fall further later in the year – to £2,153 in July and then £2,161 from October.
Business
Donald Trump tells UK to ‘get rid of windmills’ and says raising windfall tax on North Sea oil is ‘big mistake’
Donald Trump has said the UK is making “a very big mistake” in its fossil fuel policy – and should “get rid of windmills”.
In a post on Friday on his social media platform, Truth Social, Mr Trump shared news from November of a US oil producer pulling out of the North Sea, a major oil-producing region off the Scottish coast.
“The UK is making a very big mistake. Open up the North Sea. Get rid of windmills!”, the US president-elect wrote.
The Texan oil producer Apache said at the time it was withdrawing from the North Sea by 2029 in part due to the increase in windfall tax on fossil fuel producers.
North Sea oil rig. Pic: Reuters
The head of Apache’s parent company APA Corporation said in early November it had concluded the investment required to comply with UK regulations, “coupled with the onerous financial impact of the energy profits levy [windfall tax] makes production of hydrocarbons beyond the year 2029 uneconomic”.
Chief executive John Christmann added that “substantial investment” will be necessary to comply with regulatory requirements.
Mr Trump used a three-word campaign pledge “drill, baby, drill” during his successful election campaign, claiming he will increase oil and gas production during his second administration.
In the October budget announcement, UK Chancellor Rachel Reeves raised the windfall tax levied on profits of energy producers to 38%.
Called the energy price levy, it is a rise from the 25% introduced by Rishi Sunak in 2022 as energy prices soared following Russia’s invasion of Ukraine.
Many oil and gas businesses reported record profits in the wake of the price hike.
The tax was intended to support households struggling with high gas and electricity bills amid a broader cost of living crisis.
Apache is just one of a glut of firms that made decisions to alter their North Sea extraction due to the Labour policy.
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Even before the new government was elected, three companies, Jersey Oil and Gas, Serica Energy and Neo Energy – announced they were delaying, by a year, the planned start of production at the Buchan oilfield 120 miles to the north-east of Aberdeen.
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