REPORT - PROTECTING HOUSEHOLDS FROM ENERGY PRICE SURGES - THE IMPACT OF CURRENT POLICY AND OPTIONS FOR THE FUTURE

Price controls put in place at the time of initial privatisation were removed in the early 1990s, with the belief that greater competition in the fully liberalised market would act to prevent excessive prices being charged to consumers.17 The Energy Price Cap began operation in January 2019, with the aim of limiting the amount domestic consumers on standard, variable tariffs could expect to pay fo. [...] This was itself a 27% increase on the summer 2022 price cap, and 96% higher than the winter 2021/21 price cap, but was substantially lower than the forecast 80% cap rise for October that year.20 From the government’s guidance, published at the time,21 the main details of the EPG were: • The Energy Price Guarantee reduces the unit cost of electricity and gas so that a typical household in Great Bri. [...] The combination of reduced generosity and, especially, rapid declines in wholesale prices have cut the forecast cost of the scheme very substantially, to £37bn over 18 months.22 The government’s own estimate is that by the end of June 2023, the EPG saved a typical household in Great Britain around £1,100, compared to the undiscounted amount that household would have paid under the existing price c. [...] Modelling the distributional impact of the Energy Price Guarantee PEF modelled the consumption of energy of households in the United Kingdom by income decile over 2022, to show how the recent increases in the price of energy charged by UK suppliers to households have dramatically squeezed household budgets.24 We found that 22 Lawson, A., 4 January 2023, “Cost to Treasury of subsidising home energy. [...] The End Fuel Poverty coalition note that the government’s preferred measure “has failed to adequately show the scale of suffering faced by people more broadly and across the UK.” Using what they call the “traditional” income-only metric, looking at the levels of disposable income remaining after energy and housing costs presents, they argue, a truer picture of the scale of the problem.