U.K. Energy Price Cap Could Spike to £3,000 Per Household
The U.K.’s cap on energy prices could spike another 50% in October to more than 3,000 pounds ($4,006) per household following huge gains in the wholesale natural gas and electricity markets, according to Investec Bank Ltd.
The calculation assumes no change in prices over the remainder of the observation window that sets prices, but sustained market rallies could lead to another significant increase in the cap in October, said Martin Young, an analyst for Investec.
“This could be devastating for U.K households,” he said. “The political crisis will intensify.”
The price cap already will jump 54% in April to 1,971 pounds, potentially pushing about 5 million more households into fuel poverty. Another increase in October is widely expected, and it could be even more acute because of rising wholesale costs driven by fears about disruptions to gas supply after Russia invaded Ukraine.
Utility executives sought to play down the risks of higher prices in the longer term. The price cap that starts in April runs for six months until Oct. 1.
“For U.K. consumers, we’re near the end of winter and so, to the extent that there’s any exposure at all, it’s relatively modest in the short term,” said Greg Jackson, chief executive officer of Octopus Energy Ltd., backed by Al Gore’s investment firm. The scenario for next winter “will become a lot clearer as we see the situation over the next days and weeks.”
The government has pledged 9 billion pounds in aid to help households bear the burden of the worst cost-of-living crisis in decades. About 80% of households will get 150 pounds off their council tax bill in April, and all customers will receive a 200-pound loan in October.
“We’re right at the beginning of this new phase of the crisis,” Michael Lewis, chief executive officer of E.On U.K., said in an interview. “The priority has to be helping customers who are really struggling to pay their bills in the short term.”
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