Since last year, the cost of energy in the UK has surged. People returning to work and school and venturing out to travel again following the pandemic caused wholesale gas prices to rise, while Russia’s drastic reduction of gas exports after its invasion of Ukraine lowered the UK’s supply.
The UK’s gas imports from Russia make up less than four percent of its total supply, but the choking of Russia’s supply to countries like Germany — which gets 55 percent of its gas from Russia — meant Germany had to resort to getting more of its gas from Norway, Britain’s main supplier.
To deal with the UK’s shortened supply, Britain’s former Prime Minister Liz Truss, who resigned today, had announced a plan to increase supply that included lifting the moratorium on fracking in the UK and issuing new licenses for oil and gas exploration in the North Sea.
Facing a predicted 80 percent rise in energy bills that was expected this month, the former prime minister also announced a plan to limit household energy bills to around 2,500 pounds per year — or about $2,823 — for two years. It was said that the difference between the cost of the cap and the normal price suppliers would have charged would be paid by the government.
“This is the moment to be bold. We are facing a global energy crisis, and there are no cost-free options,” Truss told the UK Parliament at the time, as Reuters reported.
Today, Truss resigned after just six weeks as prime minister. According to Reuters, her administration failed because of her economic proposals that shocked markets and sowed division in the Conservative Party.
“I do want to accept responsibility and say sorry for the mistakes that have been made. I wanted to act to help people with their energy bills to deal with the issue of high taxes, but we went too far and too fast,” Truss told the BBC, as reported by CNN.
On Monday, Chancellor Jeremy Hunt announced that Truss’ energy price guarantee for households would end in April, which left the energy market in turmoil and put at least some of the mounting energy costs back onto consumers, the Financial Times reported.
An average yearly household gas bill in the UK at present wholesale gas prices could be about $4,508 when the price cap ends next spring.
“The original scheme was an unsustainable, unfunded guarantee,” said Adam Bell, head of policy at energy consultancy Stonehaven, as reported by the Financial Times.
In the face of developing a new system, how the energy bill pay scheme will be distributed in the long-term remains to be seen, but a combination of a tariff cap and a social tariff could be used in the interim.
The issues of energy pricing and support funding should be considered in tandem, the Financial Times said.
Ian Mulheirn of the Tony Blair Institute for Global Change said the reduction of support for households that don’t receive benefits by 25 percent could result in a savings of about $14 billion of the approximately $78.77 billion total yearly support cost for households, based on average bills of about $5,627.
“I came into office at a time of great economic and international instability. Families and businesses were worried about how to pay their bills. Putin’s illegal war in Ukraine threatens the security of our whole continent, and our country had been held back for too long by low economic growth… I recognize, though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party,” Truss said in front of 10 Downing Street, as The New York Times reported.
Truss said she would remain prime minister and leader of the Conservative Party until a successor is chosen within one week.