But an unpleasant prelude threatens to dampen the nation’s mood before the celebrations begin: Friday’s announcement of energy price caps. Energy regulator Ofgem is set to inform the public of the new level for the cap, which will come into force on 1 October. Annual bills are currently capped at £1,971 and this is forecast to rise to £3,582 in the autumn, a forecast that has risen several times since the record summer cap was introduced in April. The government is considering a range of options to help consumers, and particularly vulnerable households, cope with rising costs. These include proposals that the price cap may be frozen for a specified period. This week could also mark the beginning of the end for the cap, which has proved a divisive policy responsible for the collapse of almost 30 suppliers during the energy crisis – most notably Bulb, which remains in administration-backed from the government. The cap has its roots in a Labor conference speech by then-leader Ed Miliband in 2013, when he promised to freeze energy prices for 20 months if elected. Despite Miliband being ridiculed, Theresa May’s government implemented the cap in 2019 in a bid to combat perceived profiteering in the energy industry. “It was introduced to stop what ministers saw as a dislocation of loyal customers – whether that was happening, who knows, but that was the reason for its creation,” says Robert Buckley of consultancy Cornwall Insight. “It has forced all consumers to be exposed to these huge increases in energy bills.” However, existing legislation, which allows for an annual extension of the cap, expires next year and many believe the contract is now on borrowed time. “The cap is not fit for purpose,” says Buckley. “It forces suppliers to compensate everyone the same or lose their license. So if the compensation cost is higher than the cap, they can’t pass it on to customers. You drop the lid and still protect the most vulnerable.” Archie Bland and Nimo Omer take you to the top stories and what they mean, free every weekday morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Efforts to renew the cap have proven divisive. Ofgem changed the way it calculates and moved from announcing a new cap every six months to every quarter. This week also unfortunately brings interim results from Harbor Energy, one of the largest producers in the North Sea But it is caught between the twin goals of protecting consumers and ensuring that more suppliers don’t go under. That tension led to the dramatic resignation last week of an Ofgem non-executive, Christine Farnish, who argued the regulator was favoring business at the expense of consumers. Many suppliers without long-term hedging policies were pushed to make huge losses, unable to pass on the increased costs to customers above the cap. That problem remains for Bulb, which has about 1.6 million customers: the government has prevented the company from compensating for fuel costs, exposing it to the huge wholesale gas price hikes seen since Russia’s invasion of Ukraine. This week also brings, unfortunately, interim results from Harbor Energy, one of the largest oil and gas producers in the North Sea. Every bullish financial update from rivals such as BP and Shell has been met with a barrage of condemnation this year as energy companies win while the public faces a cost-of-living crisis. London-listed Harbor is expected to post an upbeat update, with analysts at Jefferies forecasting free cash flow of $891m (£752m) for the first six months of the year. The company has been hit hardest by the oil windfall tax as recent investments, including the Tolmount gas field off the Yorkshire coast, are barely paying off. It also claimed that its hedging policy means it has yet to feel the full impact of high energy prices. Stifel analysts estimate the levy on energy profits will cost Harbor an extra £1.1bn over the next three years. However, the company has already pledged to reward shareholders with $200 million in dividends and the same again in share buybacks. Offering further goodies to investors hours before a devastating price cap announcement could further anger the public.
