As one of her first major acts in office, Prime Minister Liz Truss has announced energy bills for the average household will be capped at £2,500 as she unveiled her plan to help Britons crippled by the crisis. speaking in the House of Commons today, she told MPs that energy bills for the average household will be frozen at £2,500, which would save Britons around £1,000 as the price cap was due to jump to £3,549 next month. Businesses are also in line to be shielded from skyrocketing energy prices as part of the package costing up to £150 billion.
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Greg Jackson, CEO and founder of Octopus Energy, commented on the announcement saying: “It’s great to see this major support for households and businesses.
“Companies and government are now working through the details and customers should sit tight and wait to hear from their energy supplier. Nothing will change until 1st October and we’ll be in touch with everyone before then.”
Ms Truss told the Commons: “This Government is moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills, it will curb inflation and boost growth.
“This guarantee, which includes a temporary suspension of green levies, means that from October 1 a typical household will pay no more than £2,500 per year for each of the next two years while we get the energy market back on track.
“This will save a typical household £1,000 a year. It comes in addition to the £400 energy bills support scheme. This guarantee supersedes the Ofgem price cap and has been agreed with energy retailers.”
The new premier added: “This is the moment to be bold. We are facing a global energy crisis and there are no cost-free options.”
Ms Truss also announced that the UK would ramp up supply of energy-boosting North Sea oil and gas, and also accelerating “deployment of all clean and renewable technologies, including hydrogen, solar, carbon capture and storage, and wind. We are already a world leader in offshore wind generation.”
In a significant move to slash bills, she announced that renewable and nuclear energy generators would “move onto Contracts for Difference to end the situation where electricity prices are set by the marginal price of gas.
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“This will mean that generators are receiving a fair price, reflecting their cost of production, further bringing down the costs of this intervention.”
This confirms reports that ministers are currently preparing what could be the biggest reform to the UK’s energy market in decades, drawing up plans to end the system through which the wholesale cost of gas essentially determines the price of electricity for consumers.
While the cost of wholesale gas has reached record levels around the world, the cost of renewable energy generation has been largely left unaffected by this energy crisis.
Despite the fact the UK generates about a quarter of its electricity from renewable sources, bills have skyrocketed, with many blaming this link between the price of gas and the price of electricity.
Mr Jackson previously slammed this system, saying: “The UK has an outdated way of running its electricity market, which is why renewable electricity is costing more during a gas crisis.
“The way it works is that every half hour there’s a single price for electricity in the UK, and it’s set by a process in which National Grid procure the generation to meet our needs from generators every half hour.
“And they pay a single national price to all those generators. So, companies like Octopus face a single price regardless of whether we are buying renewable or non-renewable electricity.
“This is bonkers. Fundamentally, we need a market reform that enables all to see the benefit of cheaper, renewable electricity.
“What we really need is market reform and dramatically more renewable generation to bring the cost down.”