UK PM Truss announces household energy bill cap at GBP2,500/year for two years

UK Prime Minister Liz Truss has unveiled plans to subsidize energy bills this winter, capping average households tariffs at around GBP2,500/year in England, Scotland and Wales for two years, versus a scheduled hike from October to GBP3,549/year.

Platts assessed the price of month-ahead baseload power in the UK market at GBP393.20/MWh ($451.86/MWh) Sept. 7, down 19% since the start of the month. Wholesale costs represent up to 70% of final household bills, according to UK energy regulator Ofgem.

"The energy price cap will be fixed at GBP2,500/year for a typical home for two years from Oct. 1, saving a typical household GBP1,000 a year," Truss told the House of Commons.

The GBP400 per household grant this winter would proceed as planned, the PM said.

All businesses, charities and public sector organizations would benefit from an equivalent guarantee on energy costs for six months, with further support for vulnerable sectors such as hospitality to be arranged thereafter, Truss said. Businesses would see the same capped price per unit as that for households.

A suspension of green levies in bills would help lift some of the costs, she said. Green levies in average bills were put at around GBP152/year by Ofgem.

A fund would be set up for households that used heating oil, were in housing parks or were on heat networks, ensuring they received equivalent support, Truss said.

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Fixed-price contracts

Renewable energy and other non-gas generators, meanwhile, would be moved to Contracts for Differences to decouple power prices from natural gas prices, with generators contracted "at a fair price reflecting their cost of production", Truss said.

An Energy Supply Taskforce would negotiate with suppliers to agree the new long-term contracts, Truss said.

In upstream oil and gas, the government will launch a new North Sea licensing round in the coming days, while the ban of fracking for gas would be lifted, the PM said.