Households are heading for an “almost inevitable” rise in energy bills in the autumn, the chief of energy regulator Ofgem has said.
Spikes in wholesale gas prices, which rose before Russia invaded Ukraine, are being passed on to consumers, Jonathan Brearley said.
He called for the switch to green energy to accelerate the move away from gas.
The UK government has previously said the energy price cap would “insulate” customers from gas price hikes.
Mr Brearley warned in a speech that gas price volatility caused by Russia’s invasion of Ukraine would result in higher costs being passed on to consumers.
“While it’s still too early to predict what the price cap will be in October, a price hike is almost inevitable,” he said.
The energy price cap is the maximum amount suppliers in England, Scotland and Wales can charge their customers for each unit of energy.
It is expected to rise in April when millions of households will face an increase in average energy bills of almost £700.
In October, the price cap will reset and Ofgem warned last week that average bills could reach £3,000.
Wholesale gas prices, which were already rising rapidly as economies emerged from the coronavirus pandemic, are being boosted by the Ukraine crisis, Mr Brearley said.
The Russian incursion into Ukraine underscored that “it is not in the interests of consumers that their energy sources or prices are so exposed to international gas markets”.
Britain’s oil and gas supplies are secure because of North Sea reserves, he said. But the oil and gas extracted from the North Sea does not belong to the UK itself, but to the oil and gas companies that drill there.
These products are then sold on the world market, which was volatile even before Russia invaded Ukraine.
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“We entered the winter with an international gas price shock of unprecedented speed, magnitude and duration,” Mr Brearley said.
“However, this gas crisis is not over yet. We are entering a second, more serious phase, which will have further consequences for customers and further financial strain for retail businesses,” he added, saying gas has risen to almost £7 a spa week alone.
“It is not in the interests of customers to have their household bills subject to the uncertainties of geopolitics,” he said.
Some Conservative MPs, notably the Net Zero Scrutiny Group, have advocated greater reliance on fossil fuels.
But Mr Brearley said we must move away from fossil fuels not only to tackle climate change but also to move away from volatile prices.
He said Britain must move to low-carbon energy as soon as possible.
Mr Brearley said it was Ofgem’s priority to manage and mitigate the “inevitable consequences” of rising energy prices for UK consumers, but he said that “we as an industry cannot pretend that our actions can mitigate the full impact of future price increases “.
He said anyone struggling to pay their bills should contact their utility company to find out what help is available, but also urged companies to reach out to their most vulnerable customers and use them where possible to support.
Prime Minister Boris Johnson said on Monday that the government would soon finalize an “energy supply strategy” amid concerns over the West’s dependence on Russian gas and oil.
He said the Government intends to use more of Britain’s energy resources: “One of the things we’re looking at is the possibility of using more of our own hydrocarbons.”
“This in no way means that we are abandoning our commitment to reducing carbon emissions [emissions].”
“You can do that, but you have to reflect the reality that things are getting tight right now and we need to step up our self-reliance as a more hydrocarbon transition.”
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