Queen’s Speech: Government set to extend energy price cap beyond 2023 to tackle soaring bills

The price cap was introduced to protect households from longterm expensive tariffs

The government is set to extend the energy price cap beyond 2023 to combat soaring energy bills that are contributing to Britain’s crippling cost of living crisis.

The energy price cap was introduced in 2019 to protect households from longterm expensive tariffs if they do not switch energy companies.

The current 2018 law allows for the price cap to be extended for one year at a time to the end of 2023 at the latest. Last year, the government said allowing the cap to remain in place beyond the 2023 “if needed” is the best option it tries to spark competition within the energy market to keep energy bills low for households.

Since then the wholesale cost of oil and gas has spiked due to Russia’s war in Ukraine and surging demand as the world emerges from the coronavirus pandemic.

The government is set to extend the energy price cap beyond 2023 amid soaring energy bills (PA Wire)

The government has now said its Energy Security Bill, announced in the Queen’s Speech on Tuesday, will enable the extension of the price cap beyond 2023, and said it will also regulate the heat networks sector. The aim is to protect consumers from volatile wholesale prices, as well as those who don’t shop around for the best deals.

Prince Charles delivered the Queen’s Speech to Parliament on Tuesday in his mother’s absence.

“Her Majesty’s Ministers will bring forward an Energy Bill to deliver the transition to cheaper, cleaner, and more secure energy,” he said. “This will build on the success of the COP26 Summit in Glasgow last year.”

The bill will not set the price cap itself as that is the job of Ofgem, the regulator for the electricity and gas markets in Britain.

On the 1 April the energy price cap increased by 54 per cent for approximately 22 million customers. Ofgem calculated that this means the average household will now pay £1,971 for their gas and electricity for the year, an increase of £693. Another price rise is expected in October.

Jim Watson, a professor of energy policy at University College London, told The Independent that the proposed energy security bill does very little to address the extreme financial pressure on these households. It is therefore “a missed opportunity” to provide them with more immediate help, and to re-start a proper programme to insulate their homes, he added.

The energy security bill aims to deliver the commitments in Britain’s energy security strategy announced last month and the government’s ten point plan for a green industrial revolution. Through the bill the government intends to develop carbon capture usage and storage and low carbon hydrogen that it says will create new jobs in the country’s former industrial heartlands.

It also aims to support investment in growing the consumer market for electric heat pumps by providing a new market standard and trading scheme in a bid to lower the costs of heat pumps over time.

Mr Watson said he welcomed this support and said ensuring proper regulation of heat networks by the energy regulator was “long overdue.”

Bob Ward, policy and communications director at the Grantham Research Institute on Climate Change at the London School of Economics and Political Science, told The Independent that when the price cap was introduced the government did not anticipate that the wholesale price of natural gas would surge and push up bills as high as they are today.

He warned there is a risk that the difference between wholesale prices and the price cap could drive companies out of business.

“It is clear that the current price cap does not provide adequate protection to poor energy consumers. On the other hand, if the cap prevents energy suppliers from covering their costs it will mean more of them will go out of business,” he said. “Frankly, the energy system needs proper reform so that consumers benefit from the lower price of renewables, but also receive more help to make sure their homes are more efficient and waste less money on heating and power.”

The energy security bill does not mention insulation, something green groups have persistently called for.

“If the government started a national street-by-street campaign to ensure the UK’s leaky houses were warm and cheap to run, energy bills would already be much lower this winter,” said Chris Venables, head of politics at environmental think tank Green Alliance.