UK regulator raises electricity price cap

British energy regulator Ofgem has announced plans to hike its price cap for average household energy bills by nearly 21% to £4,279 ($5,172) a year from January to the end of March 2023.

Ofgem said the cap, which is currently being adjusted on a quarterly basis, will increase by £730 for the three months from the beginning of 2023. The hike came ahead of the government’s freeze at £2,500 until April.

“There is no immediate action for consumers to take as a result of today’s announcement,” the regulator said.

The announcement means London’s emergency intervention to keep a lid on energy bills will save an average household some £1,779 annually compared to what it would have had to pay without the cap.

The government-backed price guarantee, aimed at protecting households against the latest economic shock related to anti-Russia sanctions, comes as the UK faces what is projected to be a prolonged recession.

Despite the government-guaranteed limit, an annual cap of £2,500 is almost double the amount households paid in 2021. Average household bills were limited to £1,277 a year ago, under Ofgem’s price cap. The government’s energy price guarantee (EPG) is expected to increase to an average of £3,000 per year from April 1 until the end of March 2024.

The EPG is expected to cost the government up to £42 billion, according to analysts at Cornwall Insight, as cited by The Guardian. The consultancy expects the Ofgem cap to be reduced to £3,921 from April and then to about £3,400 for the last six months of 2023.

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