LONDON – Britain's energy regulator announced Thursday that a cap on energy prices is going up by a record 54% because of the soaring costs of wholesale natural gas, a change that will significantly burden millions of households already squeezed by rapidly climbing bills.
The Office of Gas and Electricity Markets, known as Ofgem, said the new price cap — the maximum amount that gas suppliers can charge customers — will rise by 693 pounds ($940) per year in most parts of the U.K. starting in April. That will cause the annual bill for the average customer to go up to 1,971 pounds ($2,670).
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The decision is likely to affect 22 million households across the country.
The Treasury chief, Rishi Sunak, immediately announced a package of measures to help millions of people — including those on lower incomes — cope with the huge hike in gas bills.
“Without government action, this will be incredibly tough for millions of hardworking families,” Sunak told lawmakers.
He said the government will ease the pain by spreading the worst of the extra cost over time. Customers will get 200-pound ($271) discount on bills from October, which will be repaid in small instalments over the next few years. The majority of council tax payers will also get a 150-pound ($200) saving this year, Sunak said.
The combined measures will help most households cover about half of the extra energy costs, he said.
Ofgem's announcement adds to a cost-of-living crisis in the U.K., where food costs have been steadily rising and a tax increase is set to take effect in April. The Bank of England also raised interest rates again Thursday from 0.25% 0.5% to combat rising consumer prices.
Inflation in the country is at its highest in decades, currently standing at 5.4% as of December. The central bank has warned that can rise to 6% in April. Some analysts predict inflation could peak at close to 7% before falling later this year.