British consumers face an 80 per cent increase in household fuel bills this autumn, regulators announced on Friday in what they acknowledged was "devastating news".
Regulator Ofgem said the energy squeeze across Europe meant it had no choice but to raise the price cap, but called on Britain's next prime minister to "act urgently" and ease the pain.
How bad is Britain’s energy crisis?
With winter coming and fuel bills going through the roof, the cost of living crisis is deepening. The UK inflation rate is already in double figures and is tipped to reach an eye-watering 18.6 per cent, the highest for half a century.
The average annual household bill is going up to £3,549 ($4,186) from October and Ofgem said things could get "significantly worse" in 2023.
Analysts who correctly forecast the increase said another substantial jump to £5,386 was likely when the price cap is next updated in January.
Foreign Secretary Liz Truss and former chancellor of the exchequer Rishi Sunak, the two candidates to become Britain’s next prime minister, both acknowledge the country is facing a cost of living crisis as well as a potential recession.
The managing director of energy company EDF said British consumers were facing a "dramatic and catastrophic winter".
Why are energy bills so high?
The price of natural gas, which Britain uses in large quantities to heat homes and generate electricity, is at an all-time high on European markets.
Prices went into overdrive after Russia invaded Ukraine and slashed its natural gas exports to European countries, such as Germany and Poland.
Although the UK imports little energy directly from Russia, the squeeze across Europe makes high prices inescapable when Britain imports gas and electricity from the continent.
Prices were high even before the war, as supply chain problems left over from the coronavirus pandemic caused havoc in the global economy, and safety issues at French nuclear plants have added to the energy crunch.
Will there be power cuts?
Chancellor Nadhim Zahawi did not deny a report that planned power cuts could take place in a worst-case scenario involving cold weather and reduced imports from Norway and France.
The National Grid is holding four days of exercises in the autumn to simulate how it would respond to a gas emergency.
Where does Britain get its gas?
A little more than 40 per cent is produced domestically from gasfields in the North Sea, but the majority is imported.
Norway is by far the largest supplier, thanks to imports through a 1,170-kilometre undersea gas pipeline.
There are also pipeline links with Ireland, Belgium and the Netherlands, and liquefied natural gas is shipped in from Qatar, the US and a small amount from Russia.
Britain also buys pre-made electricity from France, Belgium, the Netherlands, Norway and Ireland, drawing, for example, on French nuclear power stations.
Another factor weakening Britain’s hand is that it has fairly little gas storage capacity, especially since its largest gas tank was closed in 2017 — a decision the opposition has sought to link to Ms Truss’s time as a treasury minister.
What is the government doing to help?
Prime Minister Boris Johnson’s government announced £37 billion ($44bn) of support for households in May, including a flat-rate payment of £400 ($470) to every household in six instalments over the winter.
Millions of poorer households will receive an additional one-off payment of £650 ($765).
Local authorities in England are also being handed an extra £500 million ($590m) to distribute to vulnerable people.
What are the Conservative candidates promising?
Dealing with the cost of living crisis has become the main dividing line between the two candidates.
Ms Truss is promising tax cuts in an emergency budget, arguing these would stimulate growth and that it is pointless to tax people more in order to “give them their own money back”.
"She will immediately take action to put more money back in people’s pockets by cutting taxes and suspending green energy tariffs," a campaign spokesperson said in a statement that neither offered nor ruled out further support.
Mr Sunak has condemned Ms Truss's tax plans as unaffordable and said cuts to national insurance would be of no use to pensioners, signalling instead that he would increase direct support.
Conservatives on the campaign trail — in pictures
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Candidates Rishi Sunak and Liz Truss at the Conservative Party leadership election hustings at Wembley Arena, London. This was the final hustings attended by Tory Party members who will vote for the new leader and next prime minister. EPA -
Liz Truss addresses Conservative Party members at Wembley Arena. AP -
Mr Sunak puts forward his case to be leader while speaking at Wembley Arena. Bloomberg -
Mr Sunak visits his family's old business, Bassett Pharmacy in Southampton, while on the campaign trail. Reuters -
Ms Truss speaks to staff at Condimentum Ltd at the Food Enterprise Park in Norwich. Getty Images -
A Rishi Sunak supporter at a hustings event in Norfolk. PA -
Mr Sunak greets people at a leadership hustings in Manchester. Bloomberg -
Ms Truss poses for a selfie with a supporter as she arrives for the event in Manchester. Getty -
Rishi Sunak looks through the sights of an anti-tank missile launcher, supplied to Ukraine, during a visit to the Thales Defence System plant in Belfast, Northern Ireland. AP -
Liz Truss at a Conservative Party leadership campaign event in Belfast. Getty -
Liz Truss meets supporters before a hustings in Perth, Scotland. Getty -
Rishi Sunak speaks during a campaign visit to Cluny Castle in Inverurie, Scotland. Getty -
Police hold back protesters outside Perth Concert Hall, Scotland, where Conservative leadership candidates Liz Truss and Rishi Sunak were speaking. PA -
A mural showing the two leadership contestants appears on a wall in Belfast, Northern Ireland. AP -
Rishi Sunak during a visit to St John's Wood Synagogue, north London. PA -
Liz Truss at the Conservative Party leadership election hustings in Cheltenham. EPA -
Rishi Sunak during a hustings event in Cheltenham. Reuters -
Liz Truss speaks to scientists during a campaign visit to a life sciences laboratory at Alderley Park in Manchester. PA -
Rishi Sunak during a campaign hustings in Darlington, England. Bloomberg -
Liz Truss meets party members before she speaks at the Darlington campaign hustings. Getty -
Rishi Sunak arrives for the Darlington hustings. Getty -
Liz Truss plays pool during a visit to the Onside Future Youth Zone in London. Reuters -
Rishi Sunak looks at a book with Teddy Openshaw, 4, as his father, Henry, looks on after a Conservative leadership campaign event in Ribble Valley, Lancashire, England. Getty -
Liz Truss plays table tennis with former Conservative party leader Iain Duncan Smith during a visit to the Onside Future Youth Zone in London. Reuters -
Liz Truss with supporters at a campaign event in Solihull, England. Reuters -
Rishi Sunak attends a campaign event held by his party in Bexhill, England. Reuters -
A protester is removed as Ms Truss speaks during the Conservative Party leadership hustings in Eastbourne. Bloomberg -
Mr Sunak speaks at an event in Edinburgh. PA -
Ms Truss leaves the hall in Exeter, south-west England, after her speech to a Conservative Party membership hustings. Getty -
Mr Sunak speaks at the University of Exeter in south-west England. AP -
A supporter of Ms Truss at a Conservative Party hustings in Exeter, south-west England. Getty -
Ms Truss at a hustings event at the Pavilion conference centre at Elland Road in Leeds. PA -
Mr Sunak in Salisbury watching a screening of the Uefa Women's Euro 2022 final between England and Germany at Wembley stadium. England won 2-1 in extra time. PA -
Ms Truss before the Uefa Women's Euro 2022 final at Wembley stadium in London. AFP -
Mr Sunak meets Tory members at Fontwell Park Racecourse. Reuters -
Ms Truss at an event in Dereham, Norfolk. AFP -
Mr Sunak in Ropley, near Winchester, Hampshire. PA -
Ms Truss speaks as Conservative Member of Parliament Tom Tugendhat looks on at a Conservative Party leadership campaign event at Biggin Hill Airport. Getty -
Ms Truss on the campaign trail in Woodford Green, on the outskirts of London. Reuters -
Mr Sunak at a Conservative Party hustings event in Leeds. AFP -
Ms Truss speaks at the hustings event in Leeds. AFP -
Sunak and Truss-themed souvenirs at a stand during the Leeds hustings event. Reuters -
Ms Truss, and her mother, Patricia, arrive for the hustings event. Getty -
Ms Truss poses with supporters in Morley, England. Getty -
Mr Sunak delivers a speech during a campaign event in Newmarket. AFP -
Ms Truss and Jake Berry, MP for Rossendale and Darwen, during a visit to a broadband interchange company in Leeds. PA -
Mr Sunak answers questions as he takes part in the hustings in Leeds. AFP -
Ms Truss speaks at an event at a private house with members of the Conservative Party in Woodford Green. PA -
Ms Truss and Mr Sunak pose for a picture before a BBC leadership debate at Victoria Hall in Hanley. Getty -
Ms Truss addresses Mr Sunak during the televised debate. Getty -
Mr Sunak, with daughters Krishna and Anushka, and wife Akshata Murthy, during a visit to Vaculug tyre specialists at Gonerby Hill Foot, Grantham. PA -
Ms Truss speaks to people while campaigning in Marden. Getty -
Ms Truss celebrates after being named, along with Mr Sunak, one of the final two candidates in the race to become the UK's next prime minister. PA -
Mr Sunak outside his campaign office in central London. EPA -
Ms Truss outside Downing Street in London. Reuters -
Rishi Sunak meets Conservative Party members and activists, in Teesport, Redcar. Reuters -
Conservative leadership candidates Mr Sunak, Ms Truss, Kemi Badenoch, presenter Julie Etchingham, Tom Tugendhat and Penny Mordaunt during 'Britain's Next Prime Minister: The ITV Debate' in London. EPA -
Ms Badenoch arrives at Here East studios in Stratford, east London, before a live television debate. PA -
Mr Sunak arrives at a London event to launch his campaign to be the next Conservative Party leader and UK prime minister. Reuters -
Mr Tugendhat appears on the BBC One current affairs programme, 'Sunday Morning'. PA -
Ms Badenoch, Ms Mordaunt, Mr Sunak, Ms Truss and Mr Tugendhat before the live television debate. PA -
Ms Mordaunt arrives for the launch of her Conservative leadership campaign at the Cinnamon Club in Westminster. PA -
Ms Truss speaks at the launch event for her campaign to become the next leader of the Tory Party and Britain's prime minister, in London. EPA -
Chancellor of the Exchequer Nadhim Zahawi, one of the candidates who has been knocked out of the race, giving a speech at the Churchill War Rooms. PA -
Former leadership candidate Jeremy Hunt appearing on the BBC One current affairs programme, 'Sunday Morning'. PA -
Sajid Javid attending the launch of his campaign to be Conservative Party leader and prime minister, at the Cinnamon Club in London. He has since been knocked out of the contest. PA -
Rehman Chishti is interviewed after announcing his bid to become the next prime minister. Mr Chishti is no longer in the race. Getty -
Mr Tugendhat speaking at the launch of his campaign. PA -
Culture Secretary Nadine Dorries and Conservative MP Iain Duncan Smith arrive for the Truss campaign launch event. Getty -
Former leadership candidate Attorney General Suella Braverman at the Churchill War Rooms in central London. PA -
Supporters of Mr Sunak wait for his arrival ahead of the campaign launch. Bloomberg -
Mr Tugendhat makes a speech at the launch of his campaign. PA -
Mr Javid mops his brow while launching his campaign. Getty -
Ms Truss leaves for work after her announcement that she would be running for the leadership of the Conservative Party. Getty
Will the support be enough?
Many are doubtful. Mr Lewis said the existing support package was based on earlier predictions of a 42 per cent rise in prices, instead of the 80 per cent now coming into view.
Some politicians say a response on the scale of the Covid-19 crisis, when Mr Sunak as chancellor spent £400 billion ($470bn) covering people’s salaries during lockdown, is needed to meet the moment.
The opposition Labour Party is ramping up pressure on ministers by saying it would freeze energy bills via a windfall tax on oil and gas producers.
“We are beyond tinkering around with small changes on bills or environmental costs,” Iain Conn, the former boss of energy company Centrica, told BBC Radio 4’s Today programme.
Mr Zahawi said he was drawing up options for the next government to "deliver support for those who need it most as soon as possible".
What else can be done this winter?
Paul Drummond, an energy expert at University College London, said the only short-term fix was improving energy efficiency to lower demand.
His recommendations include installing heat pumps and encouraging people to turn down the flow temperatures on their boilers, which should make them run more efficiently without making people colder.
The EU has moved in this direction by ordering member states to cut gas consumption by 15 per cent, but Britain has not introduced any such initiative.
“Looking at short term measures, the options are limited, but I think energy efficiency policy is really the area that's had nowhere near significant enough attention on it,” Mr Drummond told The National.
“It's the thing that really could help very strongly this winter and particularly next winter. Everything else is more medium term.”
What can be done for future winters?
There is a consensus that Britain should generate more energy at home but less agreement on how to go about it.
Mr Sunak has promised to drive up North Sea oil and gas production, building on an energy security strategy published by Mr Johnson’s government in April.
Environmental activists, who object to increasing fossil fuel production, say this is less attractive than it sounds because energy companies will sell their gas to the highest bidder, meaning Britain may not benefit.
Wind is another battleground. Offshore power is becoming significantly cheaper, said Mr Drummond, with some electricity due to come on the grid from 2026 that will be eight times less expensive than gas.
But Mr Sunak has promised the Conservative Party’s homeowning base that even a cautious move towards more onshore wind power would be scrapped if he becomes prime minister.
And both candidates have called the expansion of solar power into question by saying they would protect farmland from photovoltaic (PV) panels.
“It does concern me if they are effectively, through one means or another, banning onshore wind and solar PVs,” Mr Drummond said.
“If you are removing those options from the table, you’re essentially just leaving offshore wind, which although it is very cheap you are then reducing diversity in the sources you have.”
On nuclear power, Mr Drummond said the government’s enthusiasm for miniature reactors overlooked the fact the technology is unproven and will probably not be up and running for some time.
The nuclear industry has big plans for small reactors but industry insiders do not expect to be selling them much before the end of the decade, while Britain has a target of building a zero-carbon power grid by 2035.
There is also a major review under way into Britain’s complex pricing system, in which gas too often dictates the overall cost of energy, even if renewable sources are cheaper.
