UK consumers hit by huge energy bill increase

Millions of households across the United Kingdom are facing a huge rise in bills after energy regulator Ofgem announced it was raising the price cap by 54 percent from April.

Currently, wholesale gas prices are around four times what they were a year ago, and the price cap, based on typical usage levels, exists to avoid energy suppliers passing fluctuating wholesale prices on to consumers.

In October last year, the cap rose by 12 percent, and the steep wholesale price rises in 2021 pushed many smaller suppliers out of business, driving more customers toward a reduced number of bigger suppliers, meaning less market competition.

Around 22 million customers are likely to be affected by the latest increase, with average price rises of around 700 pounds ($952) a year.

The announcement of the change of the cap was long-anticipated but the exact figure was not, and it has turned out to be close to many of the worst-case scenario speculations.

"We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can," said Ofgem's chief executive, Jonathan Brearley. "The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem's role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas."

The price rise comes as households are already dealing with a cost of living crisis caused by inflation and rising shop prices, and with a national insurance rise also scheduled to take effect from April.

In an interview with the BBC on Sept 22, Prime Minister Boris Johnson called the surge in energy prices a "short-term" problem caused by "the global economy coming back to life" after the novel coronavirus pandemic, and said rising gas prices were an "interim" issue and the global energy markets would "rectify themselves".

Before that, writing in The Sun newspaper ahead of the 2016 Brexit referendum, Johnson promised fuel bills would be lower in the event of Britain leaving the European Union, because of the ability to cut VAT of 5 percent on fuel bills.

However, in January, Johnson rejected the idea, saying it would "end up also cutting fuel bills for a lot of people who perhaps don't need the support in quite the direct way that we need to give it".

As recently as last Sunday, Johnson and Chancellor of the Exchequer Rishi Sunak told The Sunday Times newspaper April's national insurance rise was "the right plan" and "must go ahead".

In the immediate aftermath of the price cap announcement, Sunak told Parliament about a number of measures that would be introduced to try to alleviate the financial pain for householders. They include a 200-pound cut in energy bills for every household, to be paid in instalments over five years, a system of council tax rebates, and an expansion of the Warm Home Discount program to help those on lower incomes.

Conservative Party member of Parliament Stephen McPartland tweeted the Treasury support was "welcome" but "lacks ambition" and called it a "huge missed opportunity to support families courageously".

Shortly after the announcement, in a bid to control inflation, the Bank of England announced a rise in interest rates, something that will come as another financial blow to millions of people.

With open displays of hostility toward Johnson within the Conservative Party, and local elections taking place across the country in May, the latest developments could add to an already volatile brew in British domestic politics.