Environment

Millions of Brits plunged into ‘fuel poverty’ on Friday as household energy bills surge

A protester holds a ‘Save Us From The Energy Crisis’ placard during a rally in London. British households face soaring energy bills from April 1 as the country’s energy price cap rises by 54%.
Vuk Valcic | Sopa Images | Lightrocket | Getty Images

The number of English households in fuel poverty will double to 5 million from April 1, new research warned on Friday as Brits braced for their energy bills to increase by hundreds of pounds.

The Resolution Foundation said that as a result of higher prices coming into force on Friday, 2.5 million households in England would be plunged into “fuel stress.”

Energy bills in Britain are set to surge from Friday, after Ofgem, the country’s energy regulator, announced in February that it would increase its price cap by a record-breaking 54% from April 1.

Ofgem’s price cap limits how much households in the U.K. can be charged for energy utilities, and is reviewed twice a year.

Before Friday, the price cap meant the average household’s annual energy bill was between £1,277 ($1,676) and £1,370. Under the new price cap, millions of households could see their energy bills rise by around £700 a year.

According to the Resolution Foundation’s briefing on Friday, low-income households would be hit hardest by the price rise, with the poorest 20% of households set to spend 10% of their budget on energy bills, while the wealthiest 20% of households would spend 4% of their budget on energy.

Prices in the U.K. are increasing after wholesale natural gas prices reached record highs in Europe last year, caused by a number of issues including low inventories and Russia tightening its gas supply to the EU even before disputes over energy purchases that have arisen since Moscow’s invasion of Ukraine.

The U.K. has been hit particularly hard by the wholesale gas price surge, due to its heavy reliance on gas as an energy source, and the issue has heavily contributed to the country’s worst cost of living crisis in decades.

British Finance Minister Rishi Sunak announced in February that all residential electricity customers would receive a £200 discount on their electricity bills from October, which would later be repaid in £40 installments over five years.

He also announced that the majority of households would be given a £150 rebate on their council tax — a levy paid by households based on the value of their home.

Potential impact of Ukraine war

The war in Ukraine, and the Western sanctions package that has been imposed in response, has already created volatility in energy markets, and could threaten more price and supply instability in the future.

With Russian President Vladimir Putin locking horns with European leaders after demanding payments for Russian gas be made in rubles, some energy analysts have warned that European countries — including the U.K. — could be forced to resort to rationing supplies of natural gas and diesel if Russia decides to shut off its supplies to the continent.

Putin issued a warning in recent days that if “unfriendly” countries refuse to make payments in rubles by Friday, their contracts for gas purchases would be halted — a move condemned by Germany, Europe’s biggest consumer of Russian gas, as “political blackmail.”

While the price of natural gas has fallen drastically in Europe since earlier this month, prices remain inflated.

The day-ahead price for natural gas on the U.K.’s National Balancing Point exchange reached £2.95 per therm on Friday, according to data from Reuters. A year ago, gas on the NBP traded at £0.50 per therm.

Meanwhile, the European day-ahead price on Friday was around 123 euros per megawatt-hour, according to Reuters — up from 19.2 euros a year earlier.

Oil prices have also been highly volatile since Russia launched its invasion of Ukraine on Feb. 24.

Britain’s energy price cap is set to be adjusted again in October. If wholesale energy prices remain elevated, the U.K.’s Office for Budget Responsibility has predicted that the energy price cap could rise by a further 40% in the fall. The OBR projected in an update earlier this month that it would push inflation to 8.7% and cut GDP growth.

“A £500 rise in the price cap to £2,500 on 1 October — less than the OBR forecast of a £830 rise, although this was made when gas prices were higher than they are now — would mean that almost a third of all families in England would fall into fuel stress — 7.5 million households in total,” the Resolution Foundation said Friday.

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