Annual household electricity bills could rise by almost £200, or a third, by 2025 because of increasing wholesale prices and green subsidies, leading analysts have warned. The upward pressure will force the government to increase its energy price cap repeatedly, according to the findings by Aurora Energy Research. This will leave ministers, who condemned leading suppliers last week for increasing energy bills, with the “politically awkward” reality of their own policies forcing up the level of their cap. British Gas, the biggest supplier, was condemned by the government for its “unjustified” decision to increase its own standard tariff for four million households by an average of at least £60. EDF also raised bills, with both suppliers blaming policy costs. The government is preparing to introduce a cap on all standard tariffs, which Theresa May promised would end “rip-off” bills and protect consumers from “sudden” and “significant” price increases. The cap is due by the end of this year, limiting bills for the 11 million homes that are on such tariffs and not already covered by an existing cap for vulnerable households. It could last until 2023. Ofgem, the regulator, will set the level of the cap based on its assessment of companies’ costs. The analysis by Aurora, based in Oxford, suggests the underlying costs alone are likely to increase by £188 between now and 2025 owing to a combination of policy costs and higher gas prices. This means that while the price cap is expected to deliver an initial cut to bills – erasing profits that the competition watchdog concluded were many times too high – it would need to rise repeatedly in future years.
Times 16th April 2018 read more »