Energy: Britain’s bills headed even higher

It’s getting tougher still on energy bills. New analysis out today suggests costs are set to soar even higher in the coming months, higher than predicted a mere week ago. 

The average annual energy bill for households in England, Scotland and Wales will reach £3,582 in October, according to estimates unveiled today by energy analysts, Cornwall Insight. That’s £200 higher than last week’s estimate. In January, when the price cap rises again, we can expect bills to reach £4,266 –  another £650 higher. 

To put these figures into context, the average annual energy bill just last October was £1,400. 

According to Cornwall, energy regulator Ofgem’s decision to change the price cap every three months instead of six is largely responsible for the recent jump.

Now, calls are growing for the two Tory leader candidates to stop squabbling and come together to take some form of joint position on addressing the emerging crisis. 

“The zombie government must wake up sooner than 5 Sept”, urged financial expert  Martin Lewis today. “We are sitting on a financial time bomb that’s due to explode in September.”

Government support measures were first announced in May, based on cost predictions back then. The new forecast for January is already £1,400 per year higher than the exorbitant figures predicted back then. So the £1,200 of government help being offered to the poorest households won’t even cover this difference alone. And the £400 fuel bill discount on offer to all households will barely make a dent. 

Scrapping the green levy on bills (à la Truss) or scrapping VAT (Sunak style) will both only cover a fraction of these extra costs. 

Liberal Democrat leader, Ed Davey, is urging the government to scrap the energy price cap rise in October, and fund the plan through backdating the windfall tax on oil and gas companies’ profits.

Though scrapping price cap rises would risk further energy suppliers collapsing. Some 28 have already folded in the last two years, and dealing with the collapse of energy provider Bulb alone is expected to cost the taxpayer over £1bn. 

Over 80,000 Brits are resorting to direct action, and have joined the Don’t Pay movement. If one million sign up to the group, they’re pledging to cancel their direct debit payments from October until bills reduce to an affordable level. Numerous charities, however, are warning members that refusing to pay energy bills has serious consequences, including being threatened with disconnection and damage to their credit rating.

The cost of living crisis is by no means a UK-exclusive issue. But other European countries are moving now. France has paid nearly £8.5bn to fully nationalise the energy provider, Électricité de France, and has capped EDF’s wholesale price rises to 4% for a year. Measures imposed in Spain include a windfall tax on energy companies, a ban on offices and shops from setting air conditioning below 27°C and free train travel until the end of the year on regional and medium distance trains. Similarly, Germany is offering a nationwide €9 ticket covering regional public transport travel for a month.

None of these measures alone will fully buffer consumers from rising costs. 

Though it’s worth noting, analysis from the IMF of soaring energy prices across European countries indicates that low-income households are bearing an especially heavy burden in the UK. According to its analysis, Estonia and the UK are the only included countries where living costs for the poorest 20 percent of households are set to rise by almost twice as much as those for the wealthiest.