Weekly News Review - 20th January 2023

UK energy bills predicted to fall to £2,200 in July

The latest forecasts from energy consultancy Cornwall Insight could see a typical annual energy bill fall to around £2,200 from July. This is around £300 lower than their previous prediction due to the fall in wholesale gas prices over the past few weeks.

Since the start of the year wind generation has averaged 12.3 GW which has reduced the need for gas-fired power generation. Above seasonal average temperatures and high gas storage levels across Europe as well as the return of French nuclear power have also helped to subdue wholesale gas prices.

Cornwall Insight has predicted that Ofgem’s energy price cap will have fallen from the current level of £4,279 to £3,208 in April and then further decrease to around £2,200 in July. This level of reduction would mean that household energy bills would again be determined by Ofgem’s price cap with the government’s Energy Price Guarantee becoming largely redundant.

Currently, a typical household bill is capped at £2,500 a year under the government’s Energy Price Guarantee. This figure is set to increase to £3,000 a year from April after the level of support was decreased by Chancellor Jeremy Hunt. The predicted fall in prices from July would help to lower the cost of the scheme to UK taxpayers.

The estimated cost of the scheme is now expected to be less than £37bn which is significantly lower than initial estimate of between £72bn and £140bn. This has led to increased calls for the government to use some this funding to set a ‘social tariff’ to support more vulnerable households.

Cornwall Insight said: “With wholesale prices still well above pre-pandemic levels, the lower cost of the scheme is likely to spark conversation on the additional energy bill support the Government may now be able to offer households. Thereafter, the political debate is likely to centre on household bills remaining about double the level that they were prior to the recent crisis, but with much less support available.”

However, there a large discrepancies between the prices charged by petrol stations across the UK with prices around 10p a litre higher in cities and towns than in more rural parts of the UK. This has led to renewed calls for the Competition and Markets Authority (CMA) to investigate supermarkets and fuel retailers over their pricing behaviour.

Mr Bosdet said: “Indicative of the chaos of UK pump pricing and the rampant exploitation of drivers by many fuel retailers, the AA spotted supermarket and non-supermarket retailers yesterday charging less than 140p a litre in south Wales and Northern Ireland.

“How fuel stations in areas of big populations and high volume sales can charge well over 10p more for fuel than in largely rural parts of the UK is a question that the Competition and Markets Authority will have to address.”

King Charles to divert £1bn windfarm profits towards ‘public good’

King Charles has asked for the excess profits made from six new offshore wind farms on the Crown Estate to be used for the “wider public good”. The windfarm deal is set to be worth around £1bn a year for at least three years and would have produced a significant increase in the amount going into the sovereign grant.

The King currently receives £86.3m a year under the tax-funded sovereign grant which equates to 25% of the crown estate’s annual surplus, although this is currently boosted by 10% to fund the refurbishment of Buckingham Palace. The grant is used for paying for the costs of working royals, such as travel for official engagements, and for the upkeep of royal palaces.

These excess profits are now set for a significant boost following six new offshore wind energy lease agreements, announced by the crown estate on Thursday. Since 2004, the monarch has had the right to collect royalties from wind and wave power following an act of parliament by Tony Blair’s Labour government.

However, after discussing the cost of living crisis in his Christmas message, the King has requested that the extra funds “be directed for wider public good” instead of the sovereign grant.

Three of the new offshore wind farms are located in the North Sea off the Lincolnshire and Yorkshire coast and the other three are located in the Irish Sea off the Cumbria, Lancashire and North Wales coast. It is estimated that once developed, the wind farms will generate enough electricity for around seven million households.

Dan Labbad, chief executive of the Crown Estate, said: “They demonstrate the far-reaching value that our world-class offshore wind sector can deliver for the nation – home-grown energy for all, jobs and investment for communities, revenue for the taxpayer, clean energy for the benefit of the environment, and a considerate, sustainable approach which respects our rich biodiversity.”

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