[Asia Economy Reporter Hwang Sumi] This winter, household energy bills in the UK are expected to increase significantly. This is due to electricity and gas prices nearly tripling within a year following Russia's reduction in natural gas supply.
According to major foreign media on the 27th (local time), Ofgem, the UK's energy sector regulator, announced that the energy price cap to be applied from October will be set at ?3,549 per year for a standard household (approximately 5.58 million KRW).
The energy price cap refers to the maximum amount energy suppliers can charge consumers for electricity and gas. The UK introduced this cap in January 2019 to regulate excessive energy charges by suppliers. The cap is determined by Ofgem considering wholesale gas prices, and the actual amount households pay varies depending on energy consumption. It also differs based on the area of residence and payment methods.
The energy price cap announced by Ofgem on this day is 80% higher than the current cap of ?1,971 (approximately 3.1 million KRW). Considering last year's cap was ?1,277 (2.01 million KRW), this represents nearly a threefold increase within a year.
Russian President Vladimir Putin held a meeting with the leadership of both the upper and lower houses at the Kremlin Palace in Moscow on the 7th of last month (local time). [Image source=Yonhap News]
This is interpreted as a result of soaring European natural gas prices due to Russia's weaponization of energy. Recently, Russia drastically reduced the amount of natural gas supplied to Europe as retaliation against Western sanctions following its invasion of Ukraine. Russian state-owned gas company Gazprom reduced the natural gas supply to Europe via Nord Stream 1 to 20% of the pipeline's capacity starting from the 27th of last month.
Moreover, with forecasts suggesting that Russia may not resume supply at all, concerns are rising in Europe that the energy crisis could worsen alongside the increase in natural gas prices.
According to AFP, on the 25th, the Dutch TTF gas futures price, a European natural gas price benchmark, closed at about €321 (approximately 420,000 KRW) per megawatt-hour (MWh). This is about a 10% increase from the previous day and approaches the record high of €345 set in March, immediately after Russia's invasion of Ukraine.
Meanwhile, voices within the UK criticize Ofgem's energy price hike as excessive. With the UK's consumer price inflation already exceeding 10%, a sharp rise in energy prices would increase the burden on consumers.
Concerns are especially high regarding the cost burden on energy-vulnerable groups. According to The Guardian UK, a charity warned that millions could face energy poverty this winter. It also estimated that some low-income households spend 47% of their budgets on energy costs, and The Guardian reported that this winter, many may be forced to choose between heating and food.
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