UK's Ofgem expects 'significant' rise for energy price cap in April

The sun rises behind electricity pylons near Chester, northern England October 24, 2011. REUTERS/Phil Noble

LONDON, Oct 8 (Reuters) - Britain's energy regulator Ofgem has no plans to increase a price cap on energy tariffs before April but is likely to introduce a significant rise after then, its boss said on Friday.

Jonathan Brearley, the chief executive of Ofgem, told BBC Radio that the regulator would look at all the factors that go into calculating the price cap, and that he could not yet predict the scale of the expected rise.

"Looking at the costs that are in the system, we are expecting a significant rise in April," he said.

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Britain introduced a price cap on the most widely used energy tariffs, called standard variable tariffs, in 2019 aimed at ending what former Prime Minister Theresa May called "rip-off" pricing.

Ofgem can review the cap twice a year. It raised the cap by 12-13% from October to a record 1,277 pounds ($1,736) a year, after raising it this April as well due to high wholesale costs.

Some analysts forecasts that bills could rise by 400 pounds or more next year if wholesale prices continue to increase.

Standard variable tariffs were typically among the most expensive rates and consumers were advised to switch to cheaper tariffs. However, consumer groups now say they are among the cheapest as smaller suppliers fail and there are no longer cheaper deals available.

Brearley told a conference on Thursday that more British energy suppliers could go bust because of continued high wholesale energy prices. read more

Wholesale costs can make up a large chunk of a bill. In Britain, for example, on a dual fuel bill (electricity and gas), the wholesale cost can account for 40% of the total.

So when wholesale market prices rise significantly, suppliers can hike consumer retail tariffs.

UK wholesale gas prices have surged as much as 400% or more this year. Wholesale energy prices in Europe in general have rocketed this year amid a global price rally, as it competes with Asia for natural gas where demand is also high, as well as other factors. read more

($1 = 0.7355 pounds)

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Reporting by Sarah Young, Kate Holton and Nina Chestney; Editing by Kim Coghill

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