Credit, Collections & Insolvency News
The 13 per cent rise in the energy price cap from 1 July – from £1,641 to £1,862 – will have only a small impact on household energy costs over the summer, rising by just £21 for a typical household. This justifies the Government’s decision to hold fire on targeted support until it’s really needed, the Resolution Foundation said today (Wednesday) in response to Ofgem’s announcement.
The latest rise – the largest since 2022, but still smaller than many feared at the start of the war in the Middle East – will bring prices back to levels seen in cash terms last April. In real terms, bills will be 20 per cent higher than in April 2019, before the pandemic.
The Foundation adds that, with gas consumption at its lowest during the summer months (just 7 per cent of typical household gas use is in the third quarter of the year), the impact on bills will be small, even though gas unit prices are set to rise by more than a quarter (28 per cent) on current levels. The typical cost of energy used over the summer will be just £21 higher over the three months (1 July to 30 September) than had prices remained unchanged.
But the outlook for energy bills after the summer remains uncertain, and the Government should be ready to respond if markets worsen.
The Foundation says the Government should use the coming months to construct a Targeted Energy Discount (TED) scheme that helps to reduce bills for those with low incomes and high energy use. This scheme should be targeted, temporary and timely, and avoid the wasteful blank-cheque approach taken during the last energy price shock.
Any rise in the Price Cap is bad news for consumers, but the upcoming increase is smaller than many feared at the start of the war in the Middle East. Higher gas prices are driving the overall increase, but with gas consumption low in the summer months, the typical household’s energy costs in the quarter ahead should increase by a modest £21.
The Government is right to have resisted pressure to act and should save its fiscal firepower in case the Price Cap rises further in the winter.
Ministers should use the coming months to prepare a scheme that is targeted at vulnerable households, temporary to rein in costs, and timely so that it’s ready for when the temperature drops.
