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January electricity bills to hit £4,266 after Ofgem changes price cap rules

Electricity bills for the average UK household will rise to a staggering £4,266 a year in January, experts have warned.

This follows a rise to more than £3,500 in October cost of living crisis deepening this year and into 2023, according to Cornwall Insight, an energy consultancy.

Ofgem plans to put a price cap of £4,266 for the average family over three months from the start of January.

Cornwall Insight said this was around £650 more than its previous forecast, thanks to a significant rise in wholesale gas prices. He also expects further gains in April next year before prices finally ease slightly to £3,810 from July and £3,781 from October.

It comes after Ofgem last week announced changes to how it will calculate the price cap on electricity bills.

“While our forecast prices have been rising steadily since the summer 2022 cap was set in April, the increase of more than £650 in January forecasts is a further shock,” said Craig Lowery, chief consultant Cornwall Insight.

“The cost of living crisis has already been high on the news agenda as more and more people face fuel poverty – this will only add to the concern.

“Many may consider Ofgem’s changes to the hedging formula, which have contributed to the projected increase in bills, to be unreasonable at a time when so many people are already struggling.”

Earlier this year, Ofgem announced it would calculate the cap every three months instead of every six after a number of providers collapsed, partly because they were not allowed to pass on rising costs to customers.

​While Ofgem’s changes to the hedging formula contributed to the rise in bills, the increase was mainly due to higher wholesale energy prices, Cornwall said.

Dr Lowry said the Government needed to step in and protect households from rising costs.

The government has so far promised £400 per family and extra help for the more vulnerable, but campaigners say this is falling short.

“If £400 wasn’t enough to affect the impact of our previous forecast, it certainly isn’t enough now,” Mr Lowry said.

He said the current price cap failed to control consumer prices and harmed suppliers’ business models, and questioned whether it was fit for purpose.

“The government must make the introduction of more support during the first two quarters of 2023 its number one priority.”

Boris Johnson rejected calls for an emergency cost-of-living budget, while the two front-runners to succeed him as prime minister refused to say what extra support would be available to struggling families.

Liz Truss said she preferred tax cuts to “handouts,” while Rishi Sunak indicated that more help would be needed, without specifying what that might be.

Former Conservative leader Mark Harper, a supporter of Mr Sunak in the leadership race, said the “central question” for the country’s next prime minister was how to get people through the winter, as he insisted the plan of the ex-chancellor is “correct”. one”.

Mr Harper told LBC: “I think that’s going to be a central question facing whoever is elected prime minister on September 6 is how we get people through the winter.

“There is a big difference between the two candidates. So Rishi is saying that we now expect energy prices to be higher than what he expected in May when he laid out this big support package that is now being given to people. He said more will be needed, including helping people directly.

“His opponent (Liz Truss) says she is going to cut National Insurance. It would bring a significant tax cut of say £1,810, nothing for pensioners and only £59 for full-time workers on the National Living Wage, and I just don’t think it’s going to cut it.’

January electricity bills to hit £4,266 after Ofgem changes price cap rules

Source link January electricity bills to hit £4,266 after Ofgem changes price cap rules

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