In October 2021, the price cap rose from £1,138 to £1,277 for those on default tariffs and in April 2022, this rose to £1,922 per year. These increase were then driven by a rise of over 50% in energy costs with gas prices hitting a record high as the world was emerging from the lockdown and contributed to a general rise in the cost of living in the UK. These economic pressures have led to frequent calls on the UK Government to act.
CEO of Ofgem, UK energy regulator told lawmakers that it’s energy price cap will rise again by approximately 42% in October 2022. At an approximately £1,971 per month current price cap to around £2,800 in October, by far it is the largest increase since the price cap establishment in 2014. The steep change reflects the continues disruption from Russia invasion of Ukraine and as the price changes twice every year, this new price will be there for six months.
Ofgem CEO Jonathan Brearley told a committee of lawmakers his estimates of the upcoming price cap rise on Tuesday. He said “Later today I will be writing to the chancellor to give him our latest estimates of the price cap uplift. This is uncertain, we are only part way through the price cap window, but we are expecting a price cap in October in the region of £2,800”.
The opposition has proposed a “windfall tax” on the profits of large oil and gas companies, creating public money to relieve the hardest-hit households. This remains unpopular with the industry, and while initially unpopular with the government, the UK chancellor has refused to rule out the move.