UK, 3 months extension of 3.95 million won per year for energy billing per household

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The UK’s Conservative government, Rishi Sunak, announced on the 15th that it would extend the £2,500 cap on energy costs per household by three months, which was due to end at the end of March.

£2,500 is the maximum an average household can charge for a typical household, on an annual average basis.

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It is about 330,000 won per month, but from April, it was planned to rise to 3,000 pounds (4.75 million won) a year, an average monthly amount of 390,000 won. These limits on energy bills per household are set by the Electricity and Gas Market Authority (Ofgem), but are often modified from the top due to political judgment.

Following the economic reopening of many European countries last year, Russia sharply reduced its natural gas supply following the invasion of Ukraine, causing a surge in electricity and gas prices. In the past year, the average monthly energy cost of new households has doubled, but in the UK, it has almost tripled, so the number of ‘energy poor’ who can’t use electricity and gas due to lack of money has surged.

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Offgem’s mid-2021 cap was just £1200, but it rose to £1900 in early 2022. In response to the surge in energy prices, Offgem decided on ‘3,600 pounds from October’, allowing suppliers to raise it by 90% at once and notifying people of this in the summer.

Prime Minister Liz Truss’ government, which succeeded Boris Johnson’s government in early September, announced a mini-budget that was criticized for tax cuts for the rich, saying it would cut the ceiling from £3,600 to £2,500.

At the end of October, newly appointed Prime Minister Sunak and Treasury Secretary Jeremy Hunt accepted the downward adjustment policy and extended the period to the end of March next year, the end of the winter season. Offgem announced in December that it would raise the price to £3,000 from April.

The £2,500 reduction from £3,600 was implemented under the name of the ‘Energy Price Guarantee (EPG)’, which resulted in households receiving an average of £66 per month in energy subsidy this winter, totaling £400. The government also introduced an energy subsidy of £160 per household.

European countries are subsidizing household energy costs this winter despite mild weather, with an additional budget of over 700 billion euros (980 trillion won). Of this, Germany provided 270 billion euros, and Britain subsidized 100 billion euros (140 trillion won) to the people. All of these are energy subsidies financed by new government bonds.

Source: Donga

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