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Energy / Energy price cap hike a ‘cataclysmic hit to family finances’, MP says

Northern Isles MP Alistair Carmichael calls on the UK Government to block the October price cap rise

THERE are fresh warnings that some people will have to choose between “heating and eating” this winter following an 80 per cent rise in the energy price cap.

The price cap limits the rates a supplier can charge for units of electricity or gas on their default, standard tariffs, and the standing charge.

Energy regulator Ofgem confirmed on Friday that the price cap will increase to £3,549 per year for dual fuel for an average UK household from 1 October.

Ofgem said from this date the equivalent per unit level of the price cap to the nearest pence for a “typical customer” paying by direct debit will be 52p per kWh for electricity customers and a standing charge of 46p per day.

But these are “averages and will vary by region, payment method and meter type”. More information can be found here.

Northern Isles MP Alistair Carmichael. Photo: Shetland News

Northern Isles MP Alistair Carmichael said the UK Government should adopt the Liberal Democrat plan to block the coming energy price cap rise to prevent a “cataclysmic hit to family finances”

“The new figure for the price cap is roughly what had been predicted in recent days but it still represents a massive shock to the system and to families already struggling with their bills,” he said.

“A near-£1,600 increase – not far off doubling the cap – will put the median household into fuel poverty across this country.”

The price cap, as set out in law, puts a maximum per unit price on energy that reflects what it costs to buy energy on the wholesale market and supply it to homes.

The rise is in part down to the knock-on effects of Russia’s invasion of Ukraine.

Ofgem CEO Jonathan Brearley said the next prime minister will “need to act further” to tackle not only the price rises in October but expected increases next year too.

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“We are working with ministers, consumer groups and industry on a set of options for the incoming prime minister that will require urgent action,” he said.

“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.”

Shetland is, of course, one of the areas worst off in Scotland for fuel poverty, which is when 10 per cent of a household’s income is spent on heating to a satisfactory level.

Figures from last year showed that 31 per cent of Shetland households live in fuel poverty and 22 per cent suffer from extreme fuel poverty – when 20 or more per cent goes towards heating.

Regional Labour MSP Rhoda Grant said the increase will have a bigger impact in the Highlands and Islands, “in that we already pay unfair distribution costs”.

“Added to that many homes in Highlands and Islands are not on the gas grid and are reliant on electricity, oil or LPG to heat their home,” she said.

“Both of our governments could do more to help the cost of living. For example, neither of our governments have offered help to those who pay for oil or gas upfront.

“We hear of the huge profits that oil and gas companies are making yet people are going to be plunging themselves into debt just to get through the winter. It’s completely obscene and something needs to be done.”

The UK Government said it already has a a £37 billion package of help for households, with one in four due to see £1,200 extra support, provided in instalments across the year, and everyone will receive a £400 discount on their energy bills over winter.

A spokesperson added: “The civil service is also making the appropriate preparations in order to ensure that any additional support or commitments on cost of living can be delivered as quickly as possible when the new prime minister is in place.”

Supplier OVO, which now provides for SSE energy customers following a takeover, said the government needs to do more and said the wholesale market needs reform.

It said it will write to customers in the first two weeks of September about what the cap changes will mean for prices.

Anyone struggling with electricity bills can receive support the Shetland Citizens Advice Bureau. It can be contacted on 01595 694696 or by email through its website.

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