Energy price cap decreases, yet the head of Ofgem suggests that reinstating government support for families would be beneficial

Citizens Advice has cautioned that the coming months will push vulnerable households to the brink. Millions are expected to face increased expenses following the withdrawal of government support for bills.

As the energy price cap decreases. The head of Ofgem has cautioned that families will “undoubtedly face challenges” with their winter bills. Although there is a decline of approximately £150 in the annual charge for a typical household paying through direct debit for gas and electricity from October to December, the withdrawal of government support, previously valued at £66 per month, could result in increased expenses for millions of households.

Jonathan Brearley, the Chief Executive of Ofgem, expressed that the reintroduction of these subsidies by the government would be beneficial. He emphasised the importance of collaboration between the regulator, government, and suppliers to provide the necessary support for vulnerable customers.

The government will consider any and all options moving forward

Increasing pressure on Downing Street urges exploration of alternatives to the price cap. This includes implementing a social tariff to provide more affordable gas and electricity to those in need. Andrew Bowie, the parliamentary undersecretary of state for nuclear and networks, stated that the government is open to considering any and all options in the future.

When questioned about the possibility of reevaluating the price cap, Mr. Bowie stated, “Over the period of its existence, the price cap has yielded hugely positive results for the British people.”

“However, it is right that when times change, circumstances are looked at again, which is why we have a call for evidence open right now, which is why we’re reviewing how the energy market works in this country as a whole.”

“We are determined to get it right moving forward.”

Citizens Advice has cautioned that this winter may be “as bad, if not worse” than the last. With a record number of individuals already falling behind on their energy expenses, the organisation urgently calls for targeted government support. “The next few months will push households like these over the edge.”

Analysts caution that bills might surpass the £2,000 mark again in the early months of next year.

Addressing reporters in Yorkshire, Prime Minister Rishi Sunak emphasised the significance of directing support towards the most vulnerable in society, stating, “really important” to “target our support to the most vulnerable in society, and that’s what we’re doing”. He further remarked, “I know things are still tough and that’s why we are working night and day to bring down inflation, so that the money in people’s pockets can go further.”

Updates to the price cap have been revealed

The cost of gas for suppliers is decreasing from 6.9p to 6.89p per kilowatt hour (kWh). Electricity prices are dropping from 30.1p per kWh to 27.35p. Weaker wholesale prices are behind this reduction, and Ofgem notes a stabilisation in the market. Suppliers returning to a more robust financial position.

The price cap could have been even lower, by an additional £100, if it had considered a forthcoming Ofgem calculation indicating decreased energy consumption. The regulator has introduced measures to cut costs for prepayment metre customers. They are to provide extra support for those facing disconnection from the network.

However, there is a slight increase in the earnings allowed for energy firms per household, an additional £10 per year, primarily set aside in case of supplier failure. Ofgem highlights that during the peak of the energy crisis, 30 suppliers went bankrupt due to insufficient reserve capital. This resulted in an £83 increase in bills for all customers.

A positive and promising decline

Household consumption has sharply decreased following the bill shocks of the past 18 months.

Energy Security Secretary Grant Shapps characterised the October decline in the price cap as “promising”. This was viewed as another achievement in the government’s commitment to halving inflation. He stated, “We are effectively reducing Putin’s influence in global energy markets, preventing future ransom scenarios, and enhancing our energy independence to provide more affordable, cleaner, and secure energy to British households.”

However, Ed Miliband, argued that the latest price cap announcement “illustrates the scandalous Tory cost of living crisis persisting for millions of people.” Accusing the government of aligning with oil and gas companies enjoying record profits. He stated “Under the Conservatives, higher energy bills are unfortunately becoming a permanent feature, even with this decrease, as they remain significantly higher than three years ago.”

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