The Office of Gas and Electricity Markets (Ofgem), the United Kingdom’s (U.K.’s) energy regulator has said that people will have to pay an extra £ 693 a year on their energy bills from April 2022.
The energy price cap, which limits how much providers charge per unit, is going up by 54% because of an unprecedented rise in gas prices. The new limit will compel 18 million households in England, Wales and Scotland to pay £ 1,971 a year for gas and electricity as against the current charge of £1,277 a year. Another 4.5 million people who have pre-paid meters will see an even bigger increase of £ 708 a year.
Taking it to twitter, Ofgem tweeted,
📣The government’s energy price cap is changing and this could affect you.
— Ofgem (@ofgem) February 3, 2022
Record global gas price increases mean the energy cap will rise by £693 for customers on their supplier’s standard default tariff from 1 April.
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However, the Chancellor of Exchequer – Rishi Sunak has announced to reduce the financial burden on people via council tax rebates. The Government will provide families with a total of £ 350 to cope with the rising prices. Of this, £ 200 will be offered as discount on energy bills for households from October 2022, which will be paid back over next 5 years at £ 40 per year starting in April 2023. The £ 150 will be offered as council tax rebate for those in bands A to D.
Announcing the support, Sunak tweeted,
1/ The energy regulator OFGEM has announced that the energy price cap will rise in April.
— Rishi Sunak (@RishiSunak) February 3, 2022
Without action this would be very tough for millions of families.
So we're going to step in and directly help people manage those extra costs with a £350 Energy Bills Rebate.
Explainer 👇 pic.twitter.com/N5t3NOkS7p
The Government will also be providing local authorities with a discretionary fund of nearly £ 150 million to help lower income households in higher Council Tax bands, and households in bands A-D who are exempt from Council Tax. Sunak also confirmed that the Government will go ahead with existing plans to expand eligibility for the Warm Home Discount by almost a third. A total of 3 million households will benefit from it.
The discount of £ 200 would cost the Government £ 5.6 billion while the council tax discount would cost £ 3.6 billion in 2022-23. Besides, the Bank of England has also increased interest rates from 0.25% to 0.5%, which will make borrowing money more expensive for individuals.
The cap, which is announced every six months, sets the prices that suppliers can charge for each unit of energy as well as the standing charge. This is then translated into the expected annual bill for a household that uses the typical amount of gas and electricity. That does not mean there is a limit to how much people can pay. The more gas and electricity that is used, the higher the bill.
