Energy industry reacts to new energy price cap: Calls for urgent support

Experts have highlighted that energy bills for many individuals will stay significantly higher – about 80% more than two years ago

Regulator Ofgem has revealed that energy bills for the average household will see a minor decrease to £1,923 per year during the three-month period starting from October.

Record numbers of people in a negative budget 

In response to the recent Ofgem price cap announcement, Gillian Cooper, who serves as the Head of Energy Policy at Citizens Advice, expressed her concerns about the effectiveness of the new cap in addressing the challenges faced by consumers.

Cooper said: “Well before the winter hits, we’re already helping record numbers of people behind on their energy bills. Today’s price cap announcement will do little to change that. Typical households are still facing sky-high energy costs, now that support schemes have come to an end.

“Increasing numbers of people we help are in a negative budget, where they simply don’t have enough money coming in to cover even just their essential bills. The next few months will push households like these over the edge. Our data suggests it will be as bad, if not worse, than last winter.

“Government must step in quickly with more targeted support for the households who need it most.”

Little comfort

“Today’s announcement of the price cap reduction could be seen as a positive signal of declining energy prices,” stated David Cheadle, Chief Operating Officer at the charity Money Advice Trust, which operates National Debtline.

Mr Cheadle added, however, that the announcement provides little comfort to households already grappling with soaring energy expenses.

Cheadle emphasised that the current situation is particularly distressing for those who are struggling to manage their energy bills alongside other high costs.

As the winter months approach, Mr Cheadle anticipates that many households will face extremely challenging decisions unless additional support is provided.

People will continue to face a struggle

In response to Ofgem’s latest price cap announcement, Dhara Vyas, Deputy Chief Executive of Energy UK, stated, “Another fall in the price cap from October is obviously welcome news for customers but energy bills are still much higher than they were 18 months ago.

“The government’s energy bill support was a lifeline during an extended period of high prices but with that no longer in place, many customers will be paying a similar amount to last winter.

“As a result, many people will continue to face a struggle to afford their bills, especially given the accumulated effect of high prices over the last year and a half – in addition to wider cost-of-living pressures.”

Prices above pre-pandemic levels for the rest of the decade

Dr Craig Lowrey, Principal Consultant at Cornwall Insight, commented on the new price cap stating, “Although the slight decrease in the price cap won’t significantly impact household energy expenses, it’s a positive development that costs are shifting favourably from October onwards.”

The consultancy’s projections for 2024 indicate that prices will persist well above pre-pandemic levels, and this pattern is anticipated to persist throughout the rest of the decade.

Not out of the woods yet

Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit said: “Unfortunately we’re not out of the woods yet as gas prices are expected to stay at least 2x higher than pre-crisis levels in the longer term, and while lots of Europe has moved away from gas altogether we’re still reliant on it.

“Last year the IMF said that this reliance is why we were hit harder than other countries.

“Those in the most inefficient homes could pay around £720 more on bills over the next year than those in energy efficient ones.”

Need for transformative change

In response to the news about the decrease in the Energy Price Cap, Dillon Smith, a Centre for Policy Studies Energy and Environment Researcher stated, “While the reduction in the energy price cap is a positive development, today’s announcement doesn’t mask the pressing need for transformative change.

“The current cap was conceived for a previous market era and doesn’t align with the present or future requirements of consumers or the energy industry. Instead of fostering healthy competition and enabling lower tariffs, the cap hinders companies from engaging effectively, potentially depriving British households of substantial winter savings.”

Nationwide insulation scheme 

Commenting on Ofgem’s latest price cap announcement, Greenpeace UK’s Climate Campaigner Georgia Whitaker said: “Billpayers are sick to death of yo-yoing gas prices that still remain stubbornly high.

“Renewables are consistently the cheapest, cleanest form of power there is – making them the backbone of our energy system must be the priority.

“As well as a huge increase in wind and solar power, we urgently need a nationwide scheme to insulate homes and switch boilers for heat pumps. This would make homes warmer, allow them to use less energy and get bill payers off eye-wateringly expensive gas, once and for all.”

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