Introduction: Ofgem to announce price cap changes today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s energy regulator is due to announce its latest cap on the amount which energy suppliers can charge households – but bills are set to rise in April, regardless.
Ofgem is expected to announce that the limit which energy suppliers are able to charge domestic customers will drop by around £1,000 per year, to around £3,300 for a typical household, from April.
That cut will affect the maximum unit cost of electricity and gas for those on variable-rate tariffs. It follows the sharp fall in wholesale energy costs since last summer, after hitting record levels after the Ukraine war began.
Cornwall Insight predicted this month that the Ofgem energy price cap would hit £3,294 from April, and then drop further this summer – to about £2,150 from July until the end of the year.
Currently, the Ofgem price cap is £4,279 a year, after being hiked in January. But the government is currently limiting prices, at a level where the average home pays £2,500 per year (with a £400 energy grant pushing down costs to £2,100).
That limit is to rise to £3,000 a year in April, though, with Jeremy Hunt resisting pressure to stick to the £2,500 limit.
So, households face paying more for energy for April – and Ofgem’s price cap will remain a theoretical limit, unless it falls below £3,000 today.
But today’s energy price cap does still matter, though. It will dictate the cost of the government’s energy price guarantee to taxpayers, and probably reignite debate about whether ministers are providing enough support to strugging households.
Danni Hewson, AJ Bell head of financial analysis, says:
In the UK energy prices are still front and centre in all our minds as we look ahead to next week’s unveiling of the new energy price cap.
Unless the cap falls below £3,000 the number is moot and despite falling wholesale costs it seems unlikely Ofgem will give us all a gift-wrapped bonus just yet.
#Energy bills will rise by an average of £500 a year despite an expected reduction in Ofgem’s price cap, energy consultancy Cornwall Insight said. Ofgem will announce on Monday that it will drop the cap by around £1,000 to £3,295, effective from 1 April.
— simon read (@simonnread) February 24, 2023
Also coming up today
City investors will have Brexit on their minds, with prime minister Rishi Sunak expected to unveil a Brexit deal with the EU today that will revise Northern Ireland’s trading arrangements.
Sunak will hold face-to-face talks in the UK with the European Commission president, Ursula von der Leyen, as they aim to finalise a deal to revise the Northern Ireland protocol, the part of the Brexit deal that sets out trade rules for the region.
A breakthrough would end the bitter dispute between the two sides, and remove the prospect that the UK brings in legislation to unilaterally override the protocol, triggering a trade war with Brussels.
Under the current agreement, goods are checked as they arrive in Northern Ireland and can then be moved to Ireland. The UK wants goods entering Northern Ireland to be split into two different lanes – green for those going just to Northern Ireland and red for those destined for Ireland.
But, it’s not yet clear if eurosceptic Conservative MPs, or the Democratic Unionist Party, will back the plan….
European stock markets are set to open higher, after dropping last week as fears of more interest rate rises by America’s Federal Reserve hit shares.
The agenda
-
9am GMT: Ofgem expected to announce quarterly price cap
-
10am GMT: Eurozone business and consumer confidence reports
-
1.30pm GMT: US durable good orders for January
-
3pm GMT: US pending home sales for January
Key events
Households face a considerable increase in average energy costs from April, agrees Robert Buckley of data analysics firm Cornwall Insight.
Speaking on Radio 4’s Today Programme now, Buckley points out that average bills are currently capped at £2,100 per year – based on the government’s energy price guarantee of £2,500 for an average home, plus £400 from the Energy Bills Support Scheme.
Buckley points out, though, that “hopefully the weather should be milder” from April, meaning customer would be using less electricity and gas.
Q: Looking ahead, how might the wholesale price of energy change, and how will that affect domestic bills?
If the market stays the same, the Ofgem price cap will come down to around £2,100 [in the summer] and stay there, Buckley explains.
That would be around double the levels before the pandemic and the Ukraine war, which pushed up energy costs, he says.
BP set for clash over CEO Bernard Looney’s huge bonus
Rupert Jones
Soaring energy prices have been a painful blow to many millions of households and businesses, but a boon for energy producers.
And it means that the boss of BP, Bernard Looney, is in line for a bonus worth more than £11m.
My colleague Rupert Jones explains:
BP is set for a clash with investors after it emerged that its chief executive could be in line for a special bonus of up to £11.4m. The payment, in shares, would be on top of his £1.38m salary and annual bonus for 2022.
Strong growth in BP’s share price means Bernard Looney is set for a multimillion-pound payout from a three-year share award plan set up in 2020, when countries around the world were in lockdown and the company was cutting jobs amid a global collapse in demand for oil.
The picture now is very different: this month BP announced that its annual profits had more than doubled to $28bn (£23bn) after a sharp increase in gas prices linked to the Russia-Ukraine war. Its share price has now risen above £5.50.
BP has been consulting investors in the run-up to the publication of its annual report in early March, in which Looney’s remuneration will be confirmed. The company has previously acknowledged that some shareholders had talked about the need to improve transparency on executive pay.
One leading shareholder told the Sunday Times, which first reported the potential bonus, that payouts towards the top of the range offered by the incentive scheme would amount to “quite a blatant grab” given the rally in oil and gas prices.
More here:
Energy bill rises ‘to push 1.7m homes into crisis’
Around 1.7m more homes will be pushed into crisis if the government presses on with plans to reduce energy support in April, the Daily Mirror reports.
Its front-page story reports that critics are calling on Jeremy Hunt to scrap a £500 rise in the annual bill [the increase in its energy price guarantee (EPG) from £2,500 to £3,000] and to keep a £60-a-month support payment.
That support payment, called the Energy Bill Support Scheme, was worth £400 over the winter for all households.
The Mirror says:
Charity National Energy Action said the changes would mean the number of households in fuel poverty rising from 6.7m to 8.7m.
Fuel poverty is classed as when households have to spend at least 10% of their income on energy.
National Energy Action director Peter Smith said: “Even if the Government does scrap their EPG hike, we are still hugely worried due to the planned removal of the Energy Bill Support Scheme.”
Introduction: Ofgem to announce price cap changes today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s energy regulator is due to announce its latest cap on the amount which energy suppliers can charge households – but bills are set to rise in April, regardless.
Ofgem is expected to announce that the limit which energy suppliers are able to charge domestic customers will drop by around £1,000 per year, to around £3,300 for a typical household, from April.
That cut will affect the maximum unit cost of electricity and gas for those on variable-rate tariffs. It follows the sharp fall in wholesale energy costs since last summer, after hitting record levels after the Ukraine war began.
Cornwall Insight predicted this month that the Ofgem energy price cap would hit £3,294 from April, and then drop further this summer – to about £2,150 from July until the end of the year.
Currently, the Ofgem price cap is £4,279 a year, after being hiked in January. But the government is currently limiting prices, at a level where the average home pays £2,500 per year (with a £400 energy grant pushing down costs to £2,100).
That limit is to rise to £3,000 a year in April, though, with Jeremy Hunt resisting pressure to stick to the £2,500 limit.
So, households face paying more for energy for April – and Ofgem’s price cap will remain a theoretical limit, unless it falls below £3,000 today.
But today’s energy price cap does still matter, though. It will dictate the cost of the government’s energy price guarantee to taxpayers, and probably reignite debate about whether ministers are providing enough support to strugging households.
Danni Hewson, AJ Bell head of financial analysis, says:
In the UK energy prices are still front and centre in all our minds as we look ahead to next week’s unveiling of the new energy price cap.
Unless the cap falls below £3,000 the number is moot and despite falling wholesale costs it seems unlikely Ofgem will give us all a gift-wrapped bonus just yet.
#Energy bills will rise by an average of £500 a year despite an expected reduction in Ofgem’s price cap, energy consultancy Cornwall Insight said. Ofgem will announce on Monday that it will drop the cap by around £1,000 to £3,295, effective from 1 April.
— simon read (@simonnread) February 24, 2023
Also coming up today
City investors will have Brexit on their minds, with prime minister Rishi Sunak expected to unveil a Brexit deal with the EU today that will revise Northern Ireland’s trading arrangements.
Sunak will hold face-to-face talks in the UK with the European Commission president, Ursula von der Leyen, as they aim to finalise a deal to revise the Northern Ireland protocol, the part of the Brexit deal that sets out trade rules for the region.
A breakthrough would end the bitter dispute between the two sides, and remove the prospect that the UK brings in legislation to unilaterally override the protocol, triggering a trade war with Brussels.
Under the current agreement, goods are checked as they arrive in Northern Ireland and can then be moved to Ireland. The UK wants goods entering Northern Ireland to be split into two different lanes – green for those going just to Northern Ireland and red for those destined for Ireland.
But, it’s not yet clear if eurosceptic Conservative MPs, or the Democratic Unionist Party, will back the plan….
European stock markets are set to open higher, after dropping last week as fears of more interest rate rises by America’s Federal Reserve hit shares.
The agenda
-
9am GMT: Ofgem expected to announce quarterly price cap
-
10am GMT: Eurozone business and consumer confidence reports
-
1.30pm GMT: US durable good orders for January
-
3pm GMT: US pending home sales for January
