Ofgem raises energy price cap: British households face 10% increase

The British energy regulator Ofgem has raised the price cap for household energy by 10%. This results in a new cap of £1,717 (approximately $2,250) per year, effective from October 1st. The previous price cap had been in effect since July. This increase marks the first time since January 2023 that Ofgem has raised the cap, which at that time reached a peak of £4,279. The government had meanwhile taken measures to protect consumers and limit the annual bills of an average household to £2,500. On a positive note, the new cap is £117 cheaper than during the same period of the previous year. Ofgem cited extreme weather conditions and geopolitical events, such as the war in Ukraine, as reasons for the rise, which led to increased wholesale prices for gas. Ofgem CEO Jonathan Brearley stressed that the price increase was caused by the dependency on a volatile global gas market. This market is overly influenced by unpredictable international events and the actions of aggressive states. He added, "We know that this increase in the price cap will be extremely difficult for many households." Many British households could fall further into debt due to the recent increase, with Ofgem’s latest figures indicating that bad debts have risen to a record high of £3.1 billion and are unlikely to be recovered. The increase exceeds analysts' expectations. On August 19th, energy consultancy Cornwall Insight predicted to Reuters an increase of only 9%, due to rising wholesale prices for gas and electricity, which have stabilized compared to the last two years but have not yet fully recovered from the energy crisis and the impact of the Russian invasion of Ukraine. Earlier this year, ING Bank stated that European gas prices are trending upwards due to storage capacities being below the seasonal average. UK Energy Minister Ed Miliband commented: "The rise in the price cap is a direct consequence of the failed energy policy we inherited, which has made our country dependent on international gas markets controlled by dictators. The only solution for lower bills and greater energy independence is the government's mission for clean, domestic energy."