Some 10 million households will be plunged into "fuel stress" this autumn when British energy watchdog Ofgem is set to raise the bill cap by around £830.
Ofgem chief executive Jonathan Brearley told the Parliamentary Business, Energy and Industrial Strategy Committee on Tuesday that the cap the regulator sets on combined residential gas and electricity bills will be "in the region of £2,800" per year from October.
The six-month cap is currently current £1,971 per year since Ofgem raised the cap by £693 — or 54 percent — from April 1. The projected increase would add up to a 42 percent rise, many times the current consumer price index inflation rate of 7.8 percent.
The watchdog chief said the massive hike was unavoidable given soaring gas prices brought on by British, US and European Union sanctions on Russia since the launch of the special military operation in Ukraine.
"Gas prices are higher and highly volatile. At times they have now reached over 10 times their normal level," Brearley said.
And he warned energy market prices could soar even higher if Kiev and Moscow fail to reach a peace agreement in the next few months.
"Our future scenarios when we look beyond that, we're really managing between two extreme versions of events," Brearley said. "One where the price falls back down to where it was before — for example if we did see peace in Ukraine — and one where prices could go even further if we were to see, for example, a disruptive interruption of gas from Russia."
He said he would write to Chancellor of the Exchequer Rishi Sunak later that day with the regulator's latest estimate of the price cap uplift.
'Fuel Stress' or Poverty?
The Resolution Foundation, a think tank dedicated to raising the living standards of low and middle earners, warned that such a rise in fuel bills would put 9.6 million households in England alone under "fuel stress" this winter.
'Fuel stress' is defined as spending over 10 percent of income on heating and lighting — the former definition of fuel poverty, now classed as when energy costs drive household income below the relative poverty level of 60 percent of average earnings.
The opposition Labour Party took Brearley's comments as an opportunity to repeat its demand for a "windfall tax" on extra profits made by oil and gas extraction firms.
"How many more alarm bells do the Conservatives need before they act?" tweeted shadow chancellor Rachel Reeves. "We need an emergency budget now, with a windfall tax on oil and gas producer profits to lower bills."
But Labour's tax scheme may only raise £2 billion, or £70 per household — well short of their promise of £200 for "most" bill-payers and £600 for the most needy, and less than a tenth of the projected rise this autumn.
The government has already extended a £150 rebate to most council tax payers to help weather the energy crunch.
Labour and the other opposition parties in Parliament voted for the sanctions slapped on Russia by the Conservative government following the launch of the Ukraine operation on February 24. Prime Minister Boris Johnson has vowed to "wean off" the country from Russian oil and gas imports despite the scarcity of short-term alternative sources.