Burnham’s energy chief eyes new year cost of living cut
The government is grappling with the highest natural gas prices in Europe and the U.K. since the winter of 2022/23.
Prime Minister Andy Burnham has pledged to provide British citizens with "breathing space" on the cost of living, but energy markets are limiting his flexibility. Burnham, who assumed office in July, has made affordability his top priority since entering Downing Street. He has highlighted that British households are facing the highest energy bills in Europe. However, he is facing challenges due to international market forces beyond his control.
The most pressing issue is an anticipated increase in bills in January when the national regulator will enforce a new quarterly cap on energy unit prices, setting the average household's annual bill. Energy Secretary Miatta Fahnbulleh is targeting the budget in October to provide financial support to households, aiming to mitigate the impact of this cap in the coming year. Energy industry experts believe that the budget could be a moment for additional energy support, though the final decision lies with the Treasury.
European and UK natural gas prices have reached their highest levels since the winter of 2022/23, when they spiked following Russia's invasion of Ukraine and subsequent gas supply disruptions. The current crisis in the Middle East has further exacerbated the situation by removing Qatar, a major liquefied natural gas exporter, from the market.
This has led to fierce competition among European buyers for the limited number of LNG cargoes, driving up wholesale prices for both gas and electricity. As a result, British households, heavily reliant on gas for heating and electricity, could see their bills rise even further.
Forecasts suggest that the energy price cap could increase to £1,970 in January, a £250 rise from the current limit set for the period from October. The last time the cap was higher, from March to June 2023, the government provided universal support to every British household through a scheme initiated by former Prime Minister Liz Truss, which cost £23 billion.
Given the potential expense of such universal support, the new government is unlikely to repeat it. Former Chancellor Rachel Reeves previously suggested that the government would assist the most vulnerable households while being cautious with public finances. Her successor, John Healey, has indicated that a budget will be released on October 28, providing time for any government intervention to alleviate the January bill hike.
Ofgem, the energy regulator, is expected to announce the next energy cap in late November, following the budget.
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