The Government will have to pay almost 21 per cent more for the average household’s energy bill from the start of next year after regulators lifted the energy price cap.
The move does not affect household energy bills, which are capped at an average of £2,500 from the government’s energy price guarantee.
However, the increase in the price cap set by Ofgem increased costs for the Government, as it would be the ceiling at which energy companies could charge households for their services.
Today, Ofgem raised the price cap from £3,549 to £4,279 from January, meaning the Chancellor has to pay an extra £730 on average per household to cover the cost of supplying gas and electricity to British homes.
This means the Treasury would have to fork out an extra £1,779 on average per home over the year to pay for the energy costs of nearly 28 million British households.
The increase will cost taxpayers £42 billion over 18 months, according to analysts Cornwall Insights.
Experts at energy consultancy Aukilione estimate the new cap will cost the government around £15.1 billion in subsidizing household bills between January and March.
However, the Government has capped its bill if the cap is raised again at Ofgem’s next announcement in February.
Jeremy Hunt announced in his Autumn Statement that the Energy Price Guarantee will rise from £2,500 to an average of £3,000 a year from 1 April to the end of March 2024.
5 things to start your day
1) Households must cut energy use to beat Putin, says Hunt – Britain must cut energy use by 15 per cent to beat Vladimir Putin, Jeremy Hunt has said as the country struggles to prevent potential disruptions this winter.
2) Sunak abandons plans to override City regulators after Bank of England backlash – Rishi Sunak has abandoned plans to give ministers the power to override City regulators in a major setback for the Prime Minister.
3) As Silicon Valley swings the axe, Ireland calculates the cost of its tech addiction – When Google executives landed at Dublin Airport two decades ago on a scouting trip for a potential European headquarters, Irish government officials ferried them to the city -at-heel docklands .
4) Middle-class backlash over wholemeal flour in ‘white’ sourdough – Ocado shoppers are under fire after the luxury yeast revamped a white loaf recipe to include wholemeal, prompting the bakery behind it to deny cost cutting caused by the war in Ukraine.
5) Rishi Sunak faces rebellion over wind turbines amid energy crisis – Rishi Sunak is facing a rebellion from his MPs over onshore wind amid efforts to beat the energy crisis. Simon Clarke, MP for Cleveland Middlesbrough South and East, has tabled a legislative amendment which aims to relax planning rules to make it easier for turbines to be built if communities want them.
What happened overnight
In the US, minutes from the Federal Reserve meeting where officials raised rates by 0.75 percentage points for the fourth straight time suggested support for a slower rate hike.
Central bank officials are trying to curb inflation around the world.
As a result, US stocks rose, with the S&P 500 rising 0.6 percent and the Dow Jones Industrial Average gaining 0.3 percent. Nasdak Komposito closed 1 pc higher.
Bond yields fell. The yield on the 10-year benchmark US government debt, which influences mortgage rates, fell to 3.69 percent from 3.76 percent.
Crude oil prices fell by 3.7 percent, which reduced energy supplies. US homebuilders rallied after a report showed the housing market was healthier than previously thought.
Meanwhile, Asian shares rose on Thursday, boosted by signals that the US Federal Reserve may slow the pace of interest rate hikes and news of new economic stimulus from China.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8 percent in early trade, boosted by a 0.6 percent gain in South Korean stocks, a 0.5 percent gain in Chinese bluechips and a jump of 0.9 percent in the Hong Kong Hang Seng index
Japan’s Nikkei rose 1.3 percent, S&P 500 futures rose 0.2 percent, and the Nasdaq gained 0.3 percent.