Britons to face energy price hike as global gas prices bite

Energy prices for millions of Britons are expected to skyrocket from October after the energy regulator Energy has announced that it will increase its cap on the highest tariffs.us widely used by around 12-13 per cent, due to soaring global gas prices.

A cap on electricity bills and gas came into effect in January 2019 and was aimed at ending what former UK Prime Minister Theresa May called the 'rip off' prices charged by energy companies.

Ofgem said the rise was due to a 50 per cent increase in wholesale energy costs over the past six months.

"We cannot ask companies to sell energy for less than it costs them to buy it, " Jonathan Brearley, Director General Ofgem, said at a briefing with reporters.

Consumer groups have warned that the hike will come at the worst possible time in the fall, because the leave scheme, designed to support thes jobs before the end of the coronavirus pandemic, and the additional aid to the universal credit benefit is being cut.

Ofgem said all Anyone worried about paying their bills should contact their supplier and said customers may be able to save money by looking for a new deal.

"It will not be heartwarming for those who are now faced with the difficult choice between heating and catering, " said Simon Francis, coordinator of the End Fuel Poverty Coalition.

Ofgem calculates the cap using a formula that includes wholesale gas prices, energy suppliers 'grid costs and the costs of government policies such as renewable energy subsidies. The cap is updated twice a year.

Since the previous cap update announced in February, many UK wholesale gas contract prices have doubled. 

Gas prices have skyrocketed around the world this year due to factors such as low inventory levels, gas plant outages and Gas fields limiting domestic supply and imports from Norway, while a buying spree in Asia has led to fewer international deliveries of liquefied natural gas (LNG). 

With wholesale energy prices accounting for around 40 per cent of an average dual fuel (gas and electricity) bill, Ofgem said there was no choice but to dramatically increase the cap.

The price cap was originally scheduled to end in 2023, but the government announced last month that it would prepare legislation to allow it to continue beyond this date.

Brearley said he would be happy to have an extension.

" Despite the fact that we increase the price cap today, we know that it takes away some of the profit that we were seeing in the market before, "he said.