Martin Lewis warns of 'damaging' energy price cap rise
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According to quarterly figures for July to September released by the Department for Business, Energy and Industrial Strategy (BEIS) this morning showed year on year customers paid an average £75 more during what is typically a time of low demand. Price growth so far may dwarf in comparison to changes next year though when the energy price cap is reviewed in April. Head of personal finance at AJ Bell Laura Suter said: “Currently the average price cap is set at £1,277 after an increase in October, but various estimates show this could rise to £2,000 or more in April.” Speaking to BBC Radio 4’s Today programme Emma Pinchbeck, chief executive of Energy UK warned domestic energy prices “are going to go up 45 to 50 percent in the spring.”
Research Director of Aurora Energy Richard Howard said the prediction “seems reasonable” explaining that gas, electricity and carbon prices were all at “unprecedented highs”.
As well as the wholesale energy prices themselves Mr Howard also pointed out the cost of dealing with collapsed firms which he said: “will be recouped through customers.”
The bailout of Bulb is expected to cost taxpayers around £1.7bh while the cost of dealing with collapsed firm Avro is believed to be around £0.6bn.
Mr Howard added: “One point energy companies are making is timescale.”
“Do we have to recoup the money over six months, a year?”
With customers facing high bills anyway concern is growing over whether that should be increased further rather than spacing the costs out.
Another issue is that any increase in one component of the bill will see an increase in VAT which Mr Howard pointed out may be criticised as a government “windfall”.
Ms Pinchbeck said: “Many other governments across Europe have reduced taxes or VAT on bills.
“In the UK that would save around £90 per customer.
“There are also policy costs on energy bills that government was consulting on removing, on electricity bills primarily, they could bring that forward.
“That saves about £190 per customer.”
Ofgem is currently in the process of reviewing the energy price cap however Ms Suter warned this was “unlikely” to result in lower prices for consumers.
She added: “The only hope for people now is some form of government intervention, which has happened in some other European countries, whether that’s more help for the poorest households or tax cuts for the duty on energy bills.”
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EDF has already called for the estimated £180m raised from energy VAT receipts to help vulnerable customers.
A Government spokesperson said: “The Energy Price Cap is insulating millions of customers from record increases in global gas prices and will remain in place, and at the same rate, this winter.
“We continue to support those most in need through our £500m Household Support Fund, the Warm Home Discount and Winter Fuel Payments.”
The data out from BEIS this morning has also highlighted the rising cost of road fuels.
Petrol prices now stand at an average 146p per litre, up eight percent since mid-September and a 29 percent rise on last year.
Of this cost 58p comprised fuel duty and 24p VAT.
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