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On Monday 5th September 2022, the new Prime Minister will be announced after the former PM Boris Johnson was forced to step down- but what exactly does this mean for the ever increasing energy prices?
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On Monday 5th September 2022, the new Prime Minister will be announced after the former PM Boris Johnson was forced to step down- but what exactly does this mean for the ever increasing energy prices? Could they go up even further? Let’s find out.
The Default Tariff Cap is a limit set by Ofgem on the amount that energy suppliers can charge certain consumers for a unit of energy in order to help keep costs down for UK households.
Updates to the Default Tariff Cap are announced quarterly as follows:
In August, Ofgem announces updates to the cap that will apply from October to December.
In November, they announce updates that will apply from January to March.
In February, they announce updates that will apply from April to June
In May, they announced updates that will apply from July to September.
The current cap on the price of energy is £1,971 for the average dual-fuel tariff.
The next update to the price cap will come into force in October, a month after the new Prime Minister has been assigned to take over.
The update was announced on Friday, with Ofgem confirming that the price cap will increase to £3,549 per year for dual fuel for an average household from October– nearly double the current price and an 80% increase from October 2021.
The CEO of Ofgem said:
“It's clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year. We are working with ministers, consumer groups and industry on a set of options for the incoming Prime Minister that will require urgent action.
The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this
As Rishi Sunak and Liz Truss approach the final stage of the leadership race, both have shed light on their plans to help with the energy crisis.
In July, Rishi Sunak said he would temporarily scrap VAT on energy bills to help save families around £160 a year, a move that was described by many as a U-turn after he previously voted against a Labour plan to do the same.
At the start of August, Sunak also said he would find £10bn to help soften the impact of the October price increase, supporting the most vulnerable with the costs.
This support would be paid for by limiting and pausing existing programmes within the government as well as temporary borrowing as a last resort.
Rishi Sunak said, “If we don’t do something specific for those people, there’s a high risk that millions of people will fall into destitution.”
At the recent hustings, Liz Truss claimed she is reluctant to “bung more money” at the problem of increased energy costs but promised an emergency budget should she become Prime Minister in September.
The Budget would then cut taxes and reverse the intended 1.25% increase in National Insurance. However, this does very little to help those who are more vulnerable, with the Financial Times stating that this would offer “only £59 to someone on the national minimum wage”.
Truss has also said that she would end the moratorium on fracking in a bid to increase supply, however she has said she is against any new windfall taxes on energy companies.
If you’re looking for ways to keep your energy costs down this winter, take a look at our top energy saving tips advice.
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