Expectations Raised for 30% Increase in UK Electricity Price Cap

[Asia Economy Reporter Park Byung-hee] It is forecasted that the UK’s gas and electricity price cap will be significantly raised by 30% starting from April next year.

According to Bloomberg on the 6th (local time), UK consulting firm Cornwall Insight predicted that the annual gas and electricity price cap will be raised to about ?1,660 from April next year.

This is 30% higher than the current cap of ?1,277. Cornwall had previously estimated the cap for April next year to be ?1,251 in July but has now significantly increased its projection.

This is due to the recent surge in natural gas prices in the UK, which has caused energy production costs to soar. At the beginning of the year, the UK’s natural gas price was below 50 pence per therm (a unit of heat), but due to a recent natural gas supply shortage, the price exceeded 300 pence per therm for the first time ever on the 5th. On the 6th, it briefly surpassed 400 pence per therm before falling below 300 pence after Russia announced efforts to stabilize energy prices.

The UK government privatized the electricity and gas retail sectors in 1999 but set a price cap to prevent excessive increases in gas and electricity charges. Due to the recent surge in natural gas prices, 10 energy companies in the UK have gone bankrupt since August. Production costs rose, but companies could not raise prices due to the cap, resulting in losses they could not bear. Cornwall therefore expects a significant upward adjustment of the gas and electricity price cap to be inevitable.

The price cap is announced twice a year by the energy regulator, the Office of Gas and Electricity Markets (Ofgem). The next cap will be announced in February next year and will take effect from April 1 next year.

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