(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)


LONDON - Rishi Sunak is here to help. The good news for the 22 million British households staring down the barrel of an imminent 54% hike in their annual gas and electricity bills is that the UK chancellor has a plan to help ease the pain. The bad news is that the rises remain eye-watering, while taxpayers are on the hook if Sunak’s gas price forecasts prove too optimistic.

Energy regulator Ofgem on Thursday unveiled a long-awaited increase in its price cap which will lift the annual gas and electricity bill paid by average UK consumers by 693 pounds to 1,971 pounds as of April. But that’s only the beginning: the watchdog will review the cap again after the summer. If European gas prices stay high, the average annual bill could be 2,331 pounds, according to Cornwall Insight.

This makes Sunak’s proposed rebate of 200 pounds per customer look anaemic. Though he unveiled other measures to help the poorest consumers, most still face a big hit to their incomes at a time when inflation is high, taxation is rising, and the Bank of England has just raised interest rates for the second month running. Besides, the discount isn’t a free lunch. The UK Treasury will lend energy suppliers about 6 billion pounds to fund it, but plans to reclaim the cost from consumers over the next five years.

All this assumes Sunak is right in forecasting that European gas prices will fall next year. It’s true that gas for delivery in winter 2023 costs under 100 pence a therm, considerably less than the 130 pence a therm implied by Ofgem’s latest price cap. But ongoing supply headaches or increased tensions with Russia over Ukraine could keep prices elevated.

In that scenario, Sunak’s plan could prove the worst of all worlds. The rebate won’t be sufficient to prevent a major dent to UK household incomes or the ensuing political backlash. But the government would have to delay repayments of the loan, and probably face pressure to extend more support. Sustained high prices would also push up the cost of rescuing failed energy suppliers, which Cornwall Insight reckons already exceeds 4 billion pounds. Those expenses will also eventually be added to customers’ bills. British energy users will have to hope that Sunak, a former hedge fund manager, still has a nose for energy markets.



- UK energy regulator Ofgem said on Feb. 3 that Britain’s energy price cap would increase from April 1 for approximately 22 million customers.

- Customers on default tariffs paying by direct debit will see their annual gas and electricity bill increase by 693 pounds to 1,971 pounds. Prepayment customers will have a new cap of 2,017 pounds, an increase of 708 pounds.

- In response, UK Chancellor Rishi Sunak announced the Energy Bills Rebate to provide around 28 million households with an upfront discount on their bills worth 200 pounds.

- Energy suppliers will apply the discount to domestic electricity customers from October, with the government providing loans to meet the costs. The discount will then be automatically recovered from consumers’ bills in equal 40 pound instalments over the next five years.

- Sunak said the repayment would begin in 2023, when the government expects global wholesale gas prices to come down.

- Households in England living in the lowest-cost houses will also receive a 150 pound rebate on their council tax bills, applied directly by local authorities from April. This will not need to be repaid.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Peter Thal Larsen and Oliver Taslic) ((For previous columns by the author, Reuters customers can click on HAY/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS https://bit.ly/BVsubscribe | george.hay@thomsonreuters.com; Reuters Messaging: george.hay.thomsonreuters.com@reuters.net))