Liz Truss, the Conservative candidate who won the race to be the UK’s next prime minister, has been considering plans in recent days to spend $150 billion (£130 billion) over the next year and a half to freeze household energy bills at their current levels, officials and advisers to Truss have told Bloomberg.
Truss, announced on Monday as the winner of the Tory election to succeed Boris Johnson, will travel to Balmoral on Tuesday to be officially appointed as prime minister by Queen Elizabeth II.
As the energy and cost-of-living crisis in the UK deepens, the incoming Truss government is looking to avoid an 80% planned surge in the so-called price cap on household energy bills set to kick in in October. Truss is thus reportedly looking to freeze the annual household bill for gas and electricity at the current level of $2,281 (£1,971) or below, according to Bloomberg’s sources.
The plan to freeze the bills will cost $150 billion, documents seen by Bloomberg showed. Truss’s plan includes abolishing the current pricing regime, sidelining the energy regulator Ofgem in setting price caps, and setting a new unit price for electricity and gas.
Under Truss’s plan, energy companies, which are currently shielded by the price cap, will have to charge lower rates, while the UK government will cover the difference with what they would have charged under the price cap.
Last month, the UK energy regulator Ofgem said the new price cap for household energy bills would be $4,110 (£3,549) per year, an 80-percent hike in the energy price cap aimed at shielding consumers from price swings.
The chief executive of Ofgem, Jonathan Brearley, has also warned that another hike in the price cap would be coming in January next year, raising household energy bills much further, to above $6,950 (£6,000), according to recent forecasts. That would be almost double on the latest hike.
The price cap currently stands at $2,281 (£1,971) per year, based on typical use for the average household, which is already a 54% increase on the $1,480 (£1,277) per year that was in place between October 2021 and March 2022.
Many British households are already struggling to pay their bills, and the news of a potential freeze in energy hikes will undoubtedly be popular with them.
By Tsvetana Paraskova for Oilprice.com
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