UK looking to freeze energy rates

[jackg]

I just saw on Reuters that the UK government are planning to freeze energy rates (capped for a normal bill layer at £2500) for this year and next at a cost of an estimated $130bn for them currently this is the largest action taken in Europe apparently but it also feels like one of the last Western European countries to start to act - and one with a lot of control on how it can. BBC source

After the two years it's unclear what will happen but oil is a very sporadic industry and extra production can be set up in the North Sea as well as other countries being able to compete with the current supplies if they become more stable/less sanctioned in that time. There's also renewables such as wind which would be a reliable source of electricity in most of North West Europe (aside from a few weeks of sunny days every year).


The new prime minister about to be sworn in has been criticised for being out of touch with normal people and for chasing as much money as she can so this is an interesting start.

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[NeuroticFish]

EU has pretty much done this - and there are discussions for doing this even better - but UK is not in EU, heh...

But I would be very careful with UK new PM. She seems to tell/promise a lot of nice things and I'm afraid she won't be able to fulfill all of that because, you know, public funds is usually a limited resource.
However, the first few "promises" getting implemented may "be lucky". Fingers crossed.

[hugeblack]

How much is the current bill? This number is exaggerated in my average country, it is from 300 dollars, and even luxury villas do not reach this amount.
Generally, government support will be temporary for the winter period, after which prices will not reach these levels, so all the government will need to support is a period of several months, although the ceiling of 2500 pounds seems high to me.

Does anyone know how much subsidies the government can afford or, more precisely, how long it will keep at £2,500 if energy prices continue to rise.

[jackg]

EU has pretty much done this - and there are discussions for doing this even better - but UK is not in EU, heh...

https://www.reuters.com/business/energy/eu-energy-ministers-consider-gas-price-cap-emergency-liquidity-help-document-2022-09-04/
I missed this but it still looks like a discussion point to me except for finland and Sweden (and probably Denmark because they're already fuelled a lot by renewables and that could probably handle their entire domestic market imo).

But I would be very careful with UK new PM. She seems to tell/promise a lot of nice things and I'm afraid she won't be able to fulfill all of that because, you know, public funds is usually a limited resource.

I was thinking this but hopefully it's another puppet government that tries to work based on advice (like the last one did).
Some countries share/steal each others bills too so they might be able to function off that for the rest of her term.

However, the first few "promises" getting implemented may "be lucky". Fingers crossed.

It's a big problem and one that might cost more if it isn't fixed - in things like healthcare.

How much is the current bill? This number is exaggerated in my average country, it is from 300 dollars, and even luxury villas do not reach this amount.

When the cap was £1300 my house was estimated to be using £900 and I paid  about £600 a year so yes the numbers are a bit weird. Some old people will pay a lot more because they'll need the heating. I could warm myself up pretty well with a jumper and a hot drink on a day when it was cooler than expected (like -15C)...

Generally, government support will be temporary for the winter period, after which prices will not reach these levels, so all the government will need to support is a period of several months, although the ceiling of 2500 pounds seems high to me.

Does anyone know how much subsidies the government can afford or, more precisely, how long it will keep at £2,500 if energy prices continue to rise.

It does seem high but I think it's meant to be a compromise, albeit an arbitrary one until they manage to get something more.

The government gets an income of ~£600-£800bn in tax revenue but most of that ends up being accounted for. It doesn't have much debt compared to other countries so that might be something that could be temporarily exploited.

Most of the covid support was spending from reserves (and I'm not sure if that's the same as other countries or not).

[Fortify]

I just saw on Reuters that the UK government are planning to freeze energy rates (capped for a normal bill layer at £2500) for this year and next at a cost of an estimated $130bn for them currently this is the largest action taken in Europe apparently but it also feels like one of the last Western European countries to start to act - and one with a lot of control on how it can. BBC source

After the two years it's unclear what will happen but oil is a very sporadic industry and extra production can be set up in the North Sea as well as other countries being able to compete with the current supplies if they become more stable/less sanctioned in that time. There's also renewables such as wind which would be a reliable source of electricity in most of North West Europe (aside from a few weeks of sunny days every year).


The new prime minister about to be sworn in has been criticised for being out of touch with normal people and for chasing as much money as she can so this is an interesting start.

A really useful thing would be to nationalize companies like BP and Shell, for the benefit of the whole of Europe & the UK. They are making vast profits right now with energy prices peaking and hundreds of millions of Europeans are getting screwed over for a relatively small amount of investors. Norway had the right idea all this time with the creation of a sovereign wealth fund, where oil profits are invested for the long term benefit of citizens of the country instead of short term payouts that only help the rich get richer. Even if it was just a temporary/emergency take over until the Russian war on Ukraine is sorted, it would seem like the best solution than going for a huge loan that doesn't help the underlying problem longer term.

[davis196]

After the two years it's unclear what will happen but oil is a very sporadic industry and extra production can be set up in the North Sea as well as other countries being able to compete with the current supplies if they become more stable/less sanctioned in that time. There's also renewables such as wind which would be a reliable source of electricity in most of North West Europe (aside from a few weeks of sunny days every year).

1.Increased oil and gas production in the North Sea won't lower the prices, because the oil and gas reserves in the North Sea aren't that big and the production costs are high.
2.Can you elaborate more on the "less sanctioned" countries? I don't know about any counties(other than Russia) that will increasing gas supply if they are "less sanctioned".
3.Renewable energy is still pretty expensive, because building and installation of wind turbines in the North Sea is expensive.
4.Subsidizing the oil and gas prices for the small consumers and small businesses is a short term solution, but the British national debt is about to hit unprecedented levels.
5.The populist policy of "The rich have to pay more" makes sense in such situation, but the rich can just take their money/financial assets and leave the UK.
There's no easy solution.

[Moneyprism]

it seems that countries in Europe must be self-sufficient in their own energy so that energy crises can be prevented in the future ... although charging high costs for energy and building several power plants will have a negative impact on the economy,, but it needs to be done because energy independence is important for now

[fiulpro]

Its honestly the right time to do it and at the same time they have changed the government as well, just now the new government is elected thus it means that it would come up with few positive things to somehow help the people in this energy crisis, we all know that russia is not stopping and therefore they need to understand and manage their own money as well, maybe start the production of energy in renewable sources, therefore I do think that it's all about time to do it and New government is just helping people with the struggle.. but its not just freezing, it must also be lowering the rates slowly over time since they have to work towards having a stable rate for gas since winter is coming.

[Sithara007]

EU has pretty much done this - and there are discussions for doing this even better - but UK is not in EU, heh...

But I would be very careful with UK new PM. She seems to tell/promise a lot of nice things and I'm afraid she won't be able to fulfill all of that because, you know, public funds is usually a limited resource.
However, the first few "promises" getting implemented may "be lucky". Fingers crossed.

Liz Truss won a very close race with Rishi Sunak to become the new Prime Minister. She promised a lot of things, and some of those promises look difficult to implement. And in the next general elections, her party will lose no matter how much she perform. The gap between Labour and Conservative Party is just too wide at this moment and I don't think that they will be able to close that gap before 2024. On top of that, Keir Starmer is much more popular when compared to either Liz Truss or Rishi Sunak. A Labour-SNP coalition is likely post-2024.

[$anounimus$]

The UK has been urged to freeze its energy bill to help families struggling with rising energy costs. This will be an important debate for the government, not only for those on low incomes but for everyone in the country. We should all look forward to what the outcome will be and hope there is some thought for the future. I'm confused as to why they don't build wind turbines in North West England, or in Cornwall and that seems to have been discussed for a long time.

[avikz]

UK has to do it! I was reading a news that around 17% of UK factories have suspended production during peak hours due to the ever-increasing energy price in UK. I believe the privatization of the energy sector is a bad step taken by the government. I used too work for "British Gas" long back and I was really surprised to see the increase of more than 10% yoy basis. This is not sustainable and has to stop by the government.

I am happy that finally UK government and its new PM has taken a serious look at it and taken measures to stop it. It will put some extra pressure on the UK Treasury but if that's going to provide some relief to the common people, that's what is needed!

[DrBeer]

An excellent example of why a country should be developed, rich, and not corrupt. No, I'm not idealizing Britain, I'm comparing it with whoever created this problem. Britain, as well as the EU, will survive this winter with a slight decrease in the quality of heating and, possibly, some decrease in industrial production. But for the next winter, everyone will already come out with an optimized consumption of gas and oil, with alternative sources of supplies (to diversify ristos), and the Kremlin's gas and oil terror will end there. Now ask yourself the question - what will a terrorist country do with a huge amount of gas and oil that no one needs? But nothing - they will globally degrade and collapse, because the government is kleptomaniac terrorists, the population has been reduced to the level of cattle, and the government does not care about it. Write down this forecast and in 2-3 years compare the state of Russia in autumn 2022 and in autumn, for example, 2024 ... This is if Russia, as a single state, remains united

[kryptqnick]

The guy she was competing against for the post was criticised for exactly the same thing, and I don't think Johnson was particularly not out of touch with normal people either.
I hope that collective action of regulating energy prices that Europe intends to undertake against Russia will draw the prices down, normalize them. Of course, the UK isn't reliant on Russian energy sources, but the global market is affected by the pricing set by its actors and by what consumers are willing to pay (with consumers being countries, not people, of course).
Freezing the rates can be tricky for the future but can help people struggling with bills this winter. Maybe there can be a better short-term solution, but I don't know what it can be. And the long-term solution should be moving away from gas and oil anyway.

[Fortify]

I just saw on Reuters that the UK government are planning to freeze energy rates (capped for a normal bill layer at £2500) for this year and next at a cost of an estimated $130bn for them currently this is the largest action taken in Europe apparently but it also feels like one of the last Western European countries to start to act - and one with a lot of control on how it can. BBC source

After the two years it's unclear what will happen but oil is a very sporadic industry and extra production can be set up in the North Sea as well as other countries being able to compete with the current supplies if they become more stable/less sanctioned in that time. There's also renewables such as wind which would be a reliable source of electricity in most of North West Europe (aside from a few weeks of sunny days every year).


The new prime minister about to be sworn in has been criticised for being out of touch with normal people and for chasing as much money as she can so this is an interesting start.

It is a really dumb idea to be real and is yet another stop-gap solution that does not address the underlying problem of energy security. The government could have taken over BP at fair market value, secured reliable access to all of their oil and gas licenses and really thought about benefiting the country long term. Norway has done it for years and grown very rich off responsibly managing their oil reserves for the benefit of all their people, instead of just the few. Alternatively they could have imposed a windfall tax on these producers, who's costs have not gone up, but their profits have skyrocketed due to the war the Putin started in Ukraine this year - they do not deserve this naked profiteering.

[Gyfts]

This will just incentivize companies to not produce energy if the price of production exceeds what the capped rate is if the government, at any point, decides not to reimburse the energy companies. If the government decides the energy companies are being greedy, then what?

Normal consumers determine what their absolute price cap is. When you put that ball in the government's court, companies are forced to foot the bill for a consumer that uses more energy than they're allowed to charge for with hopes the government will hold true to their promise to reimburse. I don't anticipate this to be an issue with the UK government, I just don't believe this should be the roadmap for Europe's energy crisis. They're better off dropping renewables entirely, embracing alternative sources to oil/gas and firing up nuclear powerplants where applicable.