UK's Plan To Limit Energy Bills Will Provide Some Relief To Retailers
Liz Truss, the new prime minister, will stop energy bill increases for all households for the next two years. This is part of her plan to keep individuals from experiencing struggles. So, the UK's plan to limit energy bills will provide some relief to retailers and also to consumers.
William WillisSep 09, 2022179 Shares2516 Views
Liz Truss, the new prime minister, will stop energy bill increases for all households for the next two years. This is part of her plan to keep individuals from experiencing struggles. So, the UK's plan to limit energy bills will provide some relief to retailers and also to consumers.
Until 2024, the average annual cost of a family's energy bill will be capped at £2,500 (2,897 USD). Truss refused to put a price on the massive support scheme, saying only that "extraordinary times call for extraordinary measures."
While this is good news for businesses, the six-month price cap is much shorter than many had hoped for. Although there is no additional support for the most vulnerable, there are concerns that the measures are not specifically targeted enough.
Because of this, millions of people are anticipated to experience fuel poverty this winter. The energy price cap, or the maximum amount suppliers are permitted to charge households for each unit of energy they use, was scheduled to increase to £3,549 (4,115 USD). This rule starts in October for the average household.
The unit price will be capped to prevent bill increases for customers, but household energy costs will vary depending on how much gas and electricity are used. The difference between what energy companies pay in wholesale prices for gas and electricity and what they can charge consumers will be covered by the government.
After hearing calls to extend a windfall tax on gas and oil company profits to fund the package, Ms. Truss decided against doing so. Sir Keir Starmer, leader of the opposition Labour Party, criticized her for being "driven by dogma" for rejecting a windfall tax to pay for it, claiming that "working people will pay for that.
To avoid properly taxing the "eye-watering profits" of oil and gas companies, Liberal Democrat leader Ed Davey has accused the government of enacting a "phony freeze."
He said:
“„This will still leave struggling families and pensioners facing impossible choices this winter as energy bills almost double.
However, Ms. Truss said that it was time to be courageous in her defense.
"We are facing a global energy crisis, and there are no cost-free options," she said. This year, gas prices have gone up a lot, mostly because of the war in Ukraine, which has cut off Russian gas supplies.
Experts and charities said that people's lives would have been in danger this winter if they hadn't gotten help with their high energy bills. They said that people would have been unable to pay for basic living expenses without help. The head of Citizens Advice, Dame Clare Moriarty, said that the package will give "much-needed relief" to millions of people, but she is worried that it won't change the trends that Citizens Advice is seeing.
Moriarty said:
“„We're seeing problems turn up in the summer, which we would normally expect to be winter.
Ms. Truss also gave an overview of plans "to make sure that we have long-term security of [energy] supply." This includes lifting the ban on fracking for shale gas "where there is local support for it" and giving new oil and gas exploration licenses for the North Sea.
In addition to the plan that was mentioned above, the government in the UK will also implement some of the following plans:
- Negotiate long-term contracts with renewable and nuclear power companies.
- Launch a scheme with the Bank of England to help struggling UK energy firms.
- Remove green levies, which add £150 to bills each year and are covered by the £2,500 cap.
- New oil and gas licensing round next week to boost North Sea production.
- Continue with a previously announced £400 energy bills discount for all households.
Liz Truss Announced A Two-year Cap On Household Energy Bills Of £2,500
Energy bills capped at £2,500
Conclusion
Borrowing will be used to pay for the dramatic state intervention, adding to the UK's massive debt load. Due to the unpredictable nature of energy prices in the global energy markets, the total cost of the support cannot be determined in advance.
After that, there will be more targeted help for industries like hospitality, with a review in three months to decide which ones should get help.
There is no limit on how much businesses have to pay for energy right now, and a specific amount of help has not been given. This is because the wholesale energy market works differently than the retail market.
Those who have fixed contracts for their energy won't be affected by the price guarantee, but ministers are sure that these customers will get discounts in the future after talking with suppliers.
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