Britons will learn the scale of the financial pain they face on Thursday when the energy regulator Ofgem announces an increase to its price cap, with under-pressure households expected to see bills soaring by about 50%.
Ofgem will announce the new cap at 1100 GMT – an hour before the Bank of England is expected to hike interest rates again to tame surging inflation.
The cap covers consumers on standard variable energy tariffs, rather than fixed tariffs, equating to around 22 million households, and will come into effect from April following a period of surging wholesale energy costs.
Prime Minister Boris Johnson has promised a package of measures to help soften the blow, but charities warn millions of low-income families will not be able to afford to properly heat their homes, heaping pressure on his government.
“It’s going to be somewhere between devastating and catastrophic for households across the country,” Simon Francis, coordinator of the End Fuel Poverty Coalition, told Reuters.
Finance Minister Rishi Sunak will announce measures to help shield consumers from rising energy costs later on Thursday, the Sun newspaper reported.
The Treasury did not comment on the report.
Governments across Europe have spent tens of billions of euros trying to shield consumers from record high energy prices, such as removing taxes or supporting the most needy households, after benchmark European gas prices surged 330% last year.
In Britain, a six-month price cap has limited the immediate impact on consumers, forcing the pain on to suppliers instead, with more than 25 going out of business since the start of 2021.
Many had not hedged against future cost hikes.
Octopus Energy, Britain’s fifth biggest supplier with more than three million customers, said in January it expected to incur around 100 million pounds of losses.
HARD TIMES
Consultancy Cornwall Insight said it expected the regulator to lift the cap on the cost of gas and electricity by 49% to 1,897 pounds ($2,572) per year for a typical household, up from a previous record high of 1,277 pounds.
The jump in bills in April will coincide with a rise in taxes and a forecast peak in general inflation of 6%, a figure the central bank could revise up on Thursday.
Higher energy prices will likely push a further 1.5 million households into fuel poverty, charity National Energy Action said, meaning they are unable to afford to heat their homes to the temperature needed to keep warm and healthy.
This would take the total number of British households in fuel poverty to six million, more than a fifth of homes.
Britain, which imports around half of its gas from the international market, has ruled out a cut to VAT on energy bills.
The Times newspaper said it would instead provide state-backed loans to energy firms so they can lower bills for now, and recoup costs at a later date when energy prices fall.
