Electricity bills UK: How can the government help reduce growing gas and electricity bills?

Great Britain electricity and gas prices will take off this spring after the regulator Ofgem revised it limiting energy prices.

The limit, which sets the maximum amount a utility can charge an average customer in the UK per year, will rise sharply by 54 per cent from £ 1277 to £ 1971. This means an increase of £ 693 per year for the average customer.

In response to rising wholesale gas prices worldwide due to increased demand and declining imports to Europe, the review will take place from April 1 and potentially oppose up to 22 million households that will be unable to meet their obligations.

Chancellor Rishi Sunak has since announced that £ 150 of municipal tax will be given to ladies in the A to D ranges, and plans to offer a discount of £ 200 on the accounts.

A government-backed loan scheme of this kind will cost around £ 5 billion to £ 6 billion, well below the £ 20 billion demanded by the energy industry, which has already criticized the ads.

Dale Vince, head of Ecotricity, has already called the measures “too little, too late”.

Responding in the House of Commons, the shadow chancellor of Labor Rachel Reeves also called Mr Sunak’s plans “a scheme of buying now, pay later, which burdens costs for tomorrow”.

How much are electricity bills growing?

From April 1, families currently using the standard variable rate will see their bills rise sharply by 54 percent, or £ 693, from £ 1,277 to £ 1,171.

For approximately 4 million customers using the prepayment counter, there will be an increase of £ 708 from £ 1309 to £ 2017.

The newly announced new cap is calculated by Ofgem using a formula based on market prices and expected costs for suppliers.

What if I don’t use the standard variable rate?

People who go shopping and switch from standard variable rates could previously find offers hundreds of pounds cheaper than limiting energy prices. Now all these deals have been canceled as the cost of energy supplies has risen.

Upon expiration of forward transactions, customers will be transferred to a standard variable rate at the price cap level. The ability to go shopping is still available, but other offers will be more expensive, so customers are advised not to switch.

What alternative measures have been proposed?

Reduction of VAT

Energy UKtrade body for suppliers, previously called for a reduction in VAT on household accounts from 5 percent to zero.

Businesses pay 20 percent VAT on electricity bills, and the government offers a 5 percent rate for firms that use limited amounts of electricity. Businesses are not protected by energy price restrictions.

But in the October budget, Mr Sunak resisted calls for cuts in energy taxes. Whitehall sources said at the time that the cuts would be ill-targeted, helping people who can afford to pay as well as those who will struggle.

Green fees

Suppliers have also been asked to deduct fees that finance investments in renewable energy and improve energy efficiency. Investments will be paid for by general taxation.

They argued that it would be more progressive because those with higher incomes would make proportionally greater contributions. The levy is a tax on basic necessities that accounts for a significant portion of the amount paid by low-income households.

Meanwhile, E.On CEO Michael Lewis called for a “polluter pays” approach that would include raising the carbon tax to make up for money lost from account fees.

According to suppliers, the waiver of green fees and a reduction in VAT to zero could reduce bills by an average of 250-300 pounds.

Spread the cost

Energy UK has also proposed an industry-wide funding scheme to allow suppliers to spread the cost of gas price spikes and supplier failures over several years.

Currently, the price cap mechanism means that all these costs will hit people’s bills next year.

Under the plan, lenders will allocate funds to cover the immediate initial costs of purchasing energy, with the money paying off over a longer period. The government will not guarantee loans, but will monitor the scheme to ensure it is not abused.

Public funding

E. He also called for a “more radical” approach and suggested that the government use public funds to reduce bills in the short term.

“As an example, this could mean that the government is crediting part or all of the cost growth to its balance sheet, allowing these sudden price spikes to pay off later and reducing the immediate burden on consumers,” Mr Lewis said.

Currently, Mr. Sunak has voiced a version of this approach, although, as already mentioned, not to the extent expected by suppliers.

Dan Alchin, Deputy Director of Retail Energy UK, noted that governments in other countries have provided direct support. For example, in Ireland households have promised 100 euros (84 pounds) from their first electricity bill in 2022, and in Italy the government has provided loans to suppliers.

“Nothing should be off the table now. We need the UK government to work with industry and find a way to help customers, ”said Mr Alczyn.

“They did not react as quickly as other countries’ finance ministries.”

Why are electricity bills rising so much?

Gas imports to Europe were below in connection with the recovery of the world economythat has caused increased demand in Asia. Prolonged cold spells last winter and spring have resulted in less than usual amounts of gas remaining in storage across Europe.

The UK imports about half of its gas and is more dependent on goods for home heating than many European countries, which predominantly use electric heating systems.

Constantly low imports and the need to replenish gas storage facilities next winter have sparked demand for gas and led to further increases in gas prices.

Russia also accused of restricting gas supplies to Europe in order to exert political pressure on the EU.

The Kremlin wants governments to approve the opening of Nord Stream 2, its new gas pipeline that runs along the bottom of the Baltic Sea and to Germany, which was built but did not receive the necessary regulatory approval. Ukraine.

Wholesale electricity prices have also pushed up gas prices and rising carbon prices.

Consumers will also have to cover the costs associated with unsuccessful suppliers, some of which have failed to insure against volatile gas prices by buying enough energy in advance.

Electricity bills UK: How can the government help reduce growing gas and electricity bills?

Source link Electricity bills UK: How can the government help reduce growing gas and electricity bills?

Back to top button