Explainer-in-brief: The problems with freezing the energy price cap
In the UK, the energy price cap – decided by Ofgem – sets the maximum price you can be charged for kilowatt hour. In short, it doesn’t put a cap on how high your total bill can get, but it regulates how it is calculated. The cap is reviewed every three months.
In response to the catastrophic rise of energy bills predicted for this autumn, Keir Starmer has proposed to freeze the price cap for six months.
Starmer has been praised for suggesting concrete solutions for struggling families, but some have also found fallacies in his plan. The Labour leader has calculated the measure will cost £29bn. However, the freeze would probably need to be in place for longer to have a real impact, and it could reach a price of around £70bn as inflation goes up, according to the Institute of Fiscal Studies.
Another problem with the policy is that it doesn’t cover energy-intensive institutions like businesses or schools, which risk having to switch the lights off without financial support.