The UK’s energy crisis has been dominating headlines in recent months, particularly with Government energy regulator, Ofgem, announcing that energy bills are predicted to leap by 80% this winter, resulting in an estimated £6.7 million rise in household fuel poverty and forcing thousands of businesses to face the possibility of closure. While the energy crisis is not unique to the UK, we are facing some of the highest prices in Europe, which are nearly double France's and are only beaten by the Czech Republic, and followed by Italy and Estonia.

It’s fair to say that energy prices have been in desperate need of regulation, and this has not fallen on deaf ears. As you will have likely heard, the Government has put in place an ‘Energy Price Guarantee,’ and our latest blog will take a look at what these new regulations are and what they mean for policy professionals.

Energy Price Guarantee

Liz Truss has set out plans to freeze energy bills at an average of £2,500 a year for two years, as part of a package of support for homes and businesses, marking one of the biggest Government interventions since the financial crisis.

In her first big act as prime minister, Truss said the Government would fund the scheme to reduce the unit cost of energy. Here’s what we should expect to see from this new initiative:

• A typical household will save an average of £1,000 a year on their energy bills, under a new two-year Energy Price Guarantee
• Businesses and public sector organisations will see equivalent support over the winter
• New plans will tackle the root causes of problems in the energy market by boosting domestic energy supply
• The package will boost growth and curb inflation rises

This intervention comes after the UK failed to invest in ‘home-grown’ energy with the recent weaponisation of energy supplies exposing the UK’s vulnerability to the volatility of global markets.

Speaking on this, Truss said: “Decades of short-term thinking on energy has failed to focus enough on securing supply – with Russia’s war in Ukraine exposing the flaws in our energy security and driving bills higher. I’m ending this once and for all.

“I’m acting immediately so people and businesses are supported over the next two years, with a new Energy Price Guarantee, and tackling the root cause of the issues by boosting domestic energy supply.

“Extraordinary challenges call for extraordinary measures, ensuring that the United Kingdom is never in this situation again.”

Policy responses

While these plans will limit the increase in gas and electricity bills for a typical household to £2,500, the figure is still more than double the level last winter. What’s more, Truss’s proposal has been met with criticism from firms who are disappointed that a long-term package of support has not been confirmed for vulnerable businesses, who will have no certainty of whether they will continue to receive help in the future.

Reiterating this, Peter Hogg, UK Cities Director at Arcadis, said: “[This] announcement leaves the business sector on tenterhooks. Up and down the country, businesses – especially SMEs that employ so much of our workforce – are left with a double whammy of continuing uncertainty, no price cap and, as yet, no details on an assistance package. The government needs to make clear its plans for ‘equivalent support’ to business and do so soon."

The climate issue

Truss’s solution to the UK energy crisis has also been critiqued by several industry groups and NGOs arguing that the Government is failing to deliver on energy efficiency policies that will be key to reducing demand for hugely expensive gas. In fact, Greener Vision has called for a new long-term, targeted energy demand reduction strategy that will encourage homes and businesses to undertake measures and behaviours that drive more efficient energy use.

Claire Haigh, founder and CEO of Greener Vision, emphasised that the UK's dependency on fossil fuels was at the root of both the climate emergency as well as the cost of living and energy security crises the UK is facing, stating: "If we are to wean ourselves off fossil fuels, we must reduce energy demand and ensure that net zero is at the heart of all public policy decision-making."

"We cannot afford any backsliding on decarbonisation. We urge the new Prime Minister to tackle the cost-of-living crisis in a way that will accelerate the transition to net zero and enhance our energy security."

For public affairs and policy experts, the energy crisis is set to continue to require regulatory changes in the future. While this will be no easy task, there will be a wealth of new opportunities to evolve these changes and be a part of real change that directly impacts us all.

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