Category: Tariff Watch

Surge in energy exit fees since 2021

Bill payers risk being stuck on expensive fixed rate energy tariffs or with poor customer service as exit fees have increased by 345% in the last three years.

Around three million UK households have opted for fixed energy tariffs and the latest Warm This Winter Tariff Watch report shows that the majority have exit fees of more than £100.

The report also reveals 76% of fixed tariffs have annual costs of £1,690 or more meaning they will pay more than the current price cap. The most expensive tariff is a 2 year fixed at £1,712 a year for a typical household – leaving them £84 worse off and with extortionate exit fees of  £300.

More broadly, researchers found that exit fees have dramatically increased from an average of £42.06 in early 2021 to a peak of £187.21 on average today (a 345% increase).

High tariffs and high exit fees mean that some customers will be worse off and unable to switch to a cheaper tariff because fees would wipe out any potential savings from moving supplier. It also acts as a trap for those customers who have had poor customer service and are unable to switch supplier.

In the latest edition of Tariff Watch compiled by Future Energy Associates (FEA) who analysed the best deals on the market for customers warns that households could end up worse off if they fix now, even with the latest forecasts that prices could rise again slightly later this year. 

A spokesperson for the End Fuel Poverty Coalition commented: 

“Exit fees have gone from a minor irritation to a serious concern. Customers who have had poor customer service may now find themselves trapped with their supplier due to these penalties.

“The energy industry is quick to promote the idea that switching will save you money, but the reality is that the small print could leave struggling customers out of pocket.

“Households who are suffering the most are often the ones looking for the most security through a fixed tariff, but we would urge them to only fix if they are absolutely certain it is the right thing to do.

“Checking your bill to get your existing usage numbers and entering these details into price comparison sites is one way of testing the market – but always check that exit fees are under £100.”

Warm This Winter spokesperson Fiona Waters said:

“Yet again energy suppliers are letting customers down with many stuck in fixed rate deals they can’t get out of because of extortionate exit fees and it’s Hobson’s choice for those who want the peace of mind of a fixed rate but will probably end up worse off later in the year.

“It’s just ridiculous and unnecessary that bill payers have to navigate such a complex tariff system where they get ripped off at every level, from rising standing charges to profiteering gas companies, and still face bills that are 60 percent higher than three years ago.

“We need long term solutions from government such as expanding homegrown renewable energy and a mass programme of insulation to bring down bills once and for all.”

Future Energy Associates analyst Dylan Johnson, who helped compile the report, said: 

“While we have seen the return of competitive market conditions we are worried about certain consumer groups being left behind. Our data shows evidence that specific suppliers are raising prices in certain regions to absurd levels.”

ENDS

Relevant to England, Scotland and Wales only. For full details, methodology and sources, the full report is available to download: https://www.endfuelpoverty.org.uk/wp-content/uploads/Tariff_Watch_4_Final.pdf

Hikes in gas network costs see vampire funds profit from energy crisis

British households are boosting the profits of Chinese and Qatari Government-backed funds, which are among the groups benefiting from a 38% increase in the costs of running the country’s gas network.

A new report from the Warm This Winter campaign and Future Energy Associates has examined the ownership and revenue streams of firms running the nation’s gas infrastructure. [1]

The cost of running the gas network is charged to customers through gas unit costs and standing charges. The estimated price each household contributes has risen from £118.53 a year in 2021 to £163.69 a year from 1 April 2024 (a 38% increase). [2]

Unit costs are also driven by wholesale gas costs. Gas unit costs paid by households more than tripled at the height of the energy bills crisis and even after the latest Ofgem price cap change, every unit of gas remains 73% above 2021 levels. The daily gas standing charges customers face have also continued to increase and will not peak until the coming months, reaching 15% above 2021 levels from 1 April 2024. [3]

Of the significant owners of gas infrastructure operators, just one company is headquartered in the UK [4]. Among the 12 other owners are the sovereign wealth funds of Qatar and China, investment firms from Australia, Canada, Germany, Hong Kong and the USA alongside additional Australian and Canadian pension funds.

Among the firms profiting from the misery of increased energy bills is Macquarie, the Australian finance giant at the centre of recent Southern Water and Thames Water scandals. [5]

Macquaire co-owns 80% of National Gas, the national gas network as well as part-owning the UK’s largest regional gas distribution network company, Cadent, which supplies gas to 11 million homes. 

The report sets out that Gas Distribution Networks (GDNs) operate as natural monopolies and that the complexity in negotiations between the regulator and the firms risks tilting the balance in favour of the industry, potentially leading to excess profits at the expense of consumers.

Among the criticisms of the negotiation process are the reliance on long-term cost forecasting, informational advantage firms hold over their costs and their ability to hire expensive lobbyists and consultants which poses a risk of regulatory decisions favouring the industry, resulting in unjustifiably high prices for consumers and excess profits for the companies.

Starting from 2026, energy consumers could also face an annual bill increase of up to £43 to fund the decommissioning of the gas network, as highlighted in a new Ofgem consultation on price controls for gas and electricity transmission networks. 

Fiona Waters, spokesperson for the Warm This Winter campaign, which commissioned the report said: 

“Once again the British public is being gaslighted by an opaque and broken energy system which sees huge amounts of obscene profits going overseas and inflates bills for ordinary people who are still paying 60% more than they did three years ago. 

“Families, pensioners, children and the poor are freezing as energy companies generate billions of pounds in profit each and every week.”

A spokesperson for the End Fuel Poverty Coalition, commented:

“This murky web of international investors with deep pockets and influence are heaping pain on the nation’s households.

“The regulator is operating with one hand tied behind its back and it needs to be given powers to ensure that the firms that operate our gas network do so in the best interests of the public, not their shadowy owners.

“Ultimately, this is an industry that is dying on its feet as we move toward cleaner, safer heating systems for our homes. But we should not let these vampire funds suck cash out of hard working families’ pockets as they decommission the network.”

Dylan Johnson from Future Energy Associates commented:

“Government regulation is crucial to control the prices charged by these companies, ensuring efficiency and security of supply without unfairly burdening consumers. 

“This regulatory process involves negotiations between the companies, who aim to maximise their profits, and regulators, tasked with balancing affordable consumer prices with the need for efficient and reliable service. 

“At the moment the balance is not right and the regulator needs to take a stronger stance in negotiations.”

Jonathan Bean, from Fuel Poverty Action said: 

“It’s frightening that the Government has let a notorious investor take control of a large chunk of our energy infrastructure.  It means higher energy bills for us all.”

The report makes several recommendations for Ofgem to consider, including proposals to deliver immediate consumer rebates by network companies to address profits not in consumers’ interests and the use of real market data instead of long-term forecasts. 

The report also finds that consumer bodies should be empowered to request price control reviews in cases of excessive financial returns and ensuring balanced representation of consumer interests in regulatory decisions.

ENDS

This news story relates to England, Scotland and Wales only.

[1] Warm This Winter Tariff Watch: Gas Networks Report (March 2024): Download the full report.

[2] The Bank of England inflation calculator suggests that a solely inflationary linked increase in these costs would be from £118 to £139 – 18% increase.

[3] End Fuel Poverty Coalition records: https://www.endfuelpoverty.org.uk/about-fuel-poverty/ofgem-price-cap/ 

[4] Gas network owners:

The gas transmission network (described as the “motorway of the gas network”) is run by National Gas, which is owned by a consortium 80% of Macquarie Asset Management, British Columbia Investment Management Corporation, and National Grid plc (20%). 

Macquarie Group, an Australian powerhouse in the financial services sector which also controls parts of the UK water and sewage network, has emerged as a dominant force in the global infrastructure sphere, most notably through its ownership of National Gas in the UK. The British Columbia Investment Management Corporation (BCI) is a pivotal but relatively obscure financial institution managing the pensions of about 525,000 British Columbians. National Grid is one of the world’s largest utilities firms and is listed on the London stock exchange.

The gas distribution network (described as the “local roads of the gas network”) is ultimately owned by eleven firms:

Entity Type of firm (HQ) GDN Ownership Relevance
Qatar Investment Authority Sovereign wealth fund (Qatar) Owns stakes in critical infrastructure, including gas sectors.
Macquarie Asset Management Investment Manager (Australia) Macquarie invests and manages large numbers of global assets with a strong focus on infrastructure.  
Hermes Investment Management Private company – investment management (USA*) Investment Management firm that invests in a broad range of low risk assets. 
China Investment Corporation Sovereign wealth fund (China) Involved in owning critical infrastructure, focusing on energy sectors.
Allianz Capital Partners Private company – asset management (Germany) Specialises in infrastructure and renewable energy investments.
Brookfield Infrastructure Partners Public company – infrastructure management (Canada) Owns diversified infrastructure assets, including utilities.
Ontario Teachers’ Pension Plan Board Pension fund (Canada) Invests in a variety of sectors, including infrastructure, with a focus on stable, long-term returns.
Global Infrastructure Partners Private company – investment (USA) Manages a broad range of infrastructure assets; recent acquisition by BlackRock raises profile.
CK Hutchison Holdings & Affiliates Public company – conglomerate (Hong Kong / Cayman Islands) Owns a significant stake in utilities through multinational conglomerate structure.
Power Assets Holdings See above (Hong Kong) Part of the CK group, focuses on electricity generation, transmission, and distribution.
State Super Pension fund (Australia) Invests in critical infrastructure, including significant stakes in the aviation sector.
* Hermes Investment Management (registered in the UK) is owned by Federated Hermes, a US-based investment manager.

[5] Described by critics as a “vampire kangaroo”, in 2022, Southern faced allegations of “environmental vandalism” for releasing untreated sewage continuously for over 3,700 hours at 83 bathing water beaches in just the first eight days of November. The repercussions of a substantial debt load and potentially insufficient investment during the Australian company’s ownership of Thames Water continue to linger, with ongoing incidents of sewage leaks contaminating waterways, impacting farms and residences, and causing harm to wildlife years after the company divested its remaining stake in Thames Water.

Revealed: The charges keeping electricity bills high

Freezing households are being hit by 14 obscure energy charges that are keeping electricity bills expensive.

The figures are revealed in the latest Warm This Winter Tariff Watch Report by researchers at Future Energy Associates which examines the electricity network costs which are added to customers’ standing charges and bills. [1]

Among the 14 charges which get passed onto bills through the Ofgem price cap, customers are hit by costs such as the ‘Non-Locational demand residual banded charge’, ‘Available Supply Capacity Charges’, ‘Electricity Systems Operator Internal Allowances’ and ‘Ancillary Services costs.’ [2]

Also hidden in the charges are so-called “Line Losses” which set out the amount of energy lost while transmitting electricity around the network. These losses are added to consumers’ bills as a set amount, rather than reflecting the actual wastage incurred.

The combined impact of some of these costs and charges has meant Electricity Standing Charges have surged 119% since winter 2020/21 and account for £194 a year for every household. 

Separately, the report reveals rules which allow Distribution Network Operators (DNOs) who maintain and upgrade the grid to keep money charged to consumers but not spent.

The DNOs forecast budgets in advance and overestimation of these costs can mean that DNOs underspend and could potentially profit under a complex system called the “totex incentive mechanism” (TIM). This splits the benefit of any underspend between customers and the DNO. 

Between 2015 and 2022, DNOs spent £933 million less than they forecasted, but those that did underspend will have only given around half of that money back to consumers. [3]

The new findings also reveal that energy firms have underspent on plans to upgrade the electricity network. While these firms have overspent on short-term costs, the lack of investment in the grid is one of the reasons that electricity prices remain high despite Britain’s successful renewables industry. [4] 

The Warm This Winter Tariff Watch report also paints a poor picture for consumers looking to switch around for the best energy deal. While there are more tariffs on the market, the researchers could only find a handful of deals worth switching to and these all came with complex conditions or caveats.

Two groups which continue to lose out are those who pay on standard credit terms and are subject to a 6.2% premium and those on Economy 7 tariffs. 

One EDF overnight tariff, aimed at EV owners, offers an average nighttime electricity unit rate of just 8.00 pence per kWh across all DNO regions. In stark contrast, the Standard Variable tariff, serving as an Economy 7 equivalent from the same firm, imposes a significantly higher night-time unit rate of 16.63 pence per kWh.

A spokesperson for the End Fuel Poverty Coalition, commented:

“The complex world of electricity pricing should now be firmly in the sights of regulators and ministers.

“There must be a review into how we have arrived at so many covert charges and Ofgem must improve the transparency in the calculation of how our standing charges are arrived at.

“Of particular concern is the system whereby we are paying upfront for vital infrastructure upgrades which could help bring down electricity bills, but which are seemingly not delivered.

“We need a full audit of what has been charged, what has been spent and what could be returned to the bill payer.”

Fiona Waters of the Warm This Winter campaign, which commissioned the report added:

“The findings of the latest Tariff Watch Report reveal a disgraceful picture.

“Hardup households are being punished multiple times by energy giants. Our energy bills are still forecasted to remain well above 2021 levels for the rest of the year and the vital grid infrastructure upgrades needed to bring electricity costs down are potentially not being delivered.

“Perversely, the failure to upgrade and maintain the grid then results in line losses, which consumers also have to pay for via their bills.”

Dylan Johnson, Director at Future Energy Associates commented: 

“Ofgem must improve transparency around Distribution Use of System (DuOS) charges. There’s a clear need for a centralised repository on their website, detailing these costs, and the formulas used for their calculation. 

“Additionally, Ofgem should revisit their methodology for Line Losses, especially as we transition to a more decentralised energy system. 

“For instance, in areas like Cornwall during sunny hours, Line Loss calculations must reflect the reduced losses when electricity is generated and consumed locally. This change is crucial for a fair and efficient energy system.”

ENDS

[1] This press release refers to England, Scotland and Wales only. For full details, methodology and sources, the full report is available to download: https://www.endfuelpoverty.org.uk/wp-content/uploads/Tariff_Watch-3-FINAL.pdf

[2] Full list of charges:

  1. Non-Locational demand residual banded charge – all domestic users contribute to the fixed costs of maintaining the transmission network.
  2. Transmission Network Use of System Non-Half-Hourly demand tariff – cost of using the transmission network to supply electricity and factors in the cost of infrastructure investment and the need to ensure network reliability and capacity for future demands. Paid by consumers on unit rates.
  3. Distribution Use of System Consumption Charges – charges are based on the electricity consumption of an organisation, with rates varying according to the time of use.
  4. Meter Point Administration Number Standing Charges – a fixed daily charge applied per Meter Point Administration Number (MPAN), covering the fixed costs of electricity distribution.
  5. Available Supply Capacity Charges – These are levied based on the assigned Available Supply Capacity (ASC) of an organisation, with higher capacities incurring greater charges.
  6. Reactive Power Charges – Applied for the reactive power used by an organisation, which is essential for maintaining voltage levels within the distribution network.
  7. SOLR Fixed charge – to cover costs associated with collapsed energy firms
  8. Excess SOLR Fixed charge – to cover costs associated with collapsed energy firms
  9. Eligible Bad Debt Fixed Charge Adder – an additional charge to cover the costs associated with uncollectible debts.
  10. Balancing Use of Systems Balancing Mechanism – when there is a variance between scheduled energy generation and actual demand, the Balancing Mechanism activates to maintain grid stability.
  11. Ancillary Services costs – this covers a range of services, including frequency response, demand flexibility service, reactive power and reserve services. 
  12. Electricity Systems Operator Internal Allowances – Internal costs (allowed revenue) are calculated in the Price Control Financial Model.
  13. Balancing Use of Systems Energy Trading Costs – these are costs for trading done with generators outside of the balancing mechanism e.g. forward trading via bilateral agreements.
  14. Line Losses – the amount of energy lost while transmitting electricity around the network.

[3] Electricity North West, National Grid Electricity Distribution and UK Power Networks are the worst offenders. These three companies taken together have a combined underspend of more than £1.1bn.

The reason this is more than the 933m total is that some DNOs – especially Scottish Power Networks – have overspent. Scottish Power Energy Networks (operates MANWEB and South Scotland) does have some of the highest standing charges in the UK. 

DNO allowance and expenditure cumulative 2015-16 to 2021-22:

DNO Operator (sharing rate) DNO Region Allowance Expenditure Difference
£m £m £m %
Electricity North West (58%) North West          2,085         1,917 -168 -8%
Northern Power Grid (56%) North East          1,472         1,515     43 3%
Yorkshire         1,953         1,921 -32 -2%
National Grid Electricity Distribution (70%) Midlands         2,318         2,329       11 0%
East Midlands         2,346         2,312 -34 -1%
South Wales         1,228         1,163 -65 -5%
South West         1,890         1,831 -59 -3%
UK Power Networks (53%) London         2,007         1,741 -267 -13%
South East         1,941         1,657 -284 -15%
East Anglia         2,889         2,622 -268 -9%
Scottish Power Energy Networks (54%) South Scotland         1,747         1,792       45 3%
MANWEB         1,952         2,037       85 4%
Scottish and Southern Electricity Networks (56%) North Scotland         1,492         1,519       26 2%
Southern         2,635         2,670       34 1%
Total GB       27,957       27,023 -933 -3%

[4] Underspend has generally been in longer term investment in networks i.e. network reinforcement and replacing equipment and totals c.GBP2.5bn. Conversely over-spend has generally been in shorter term operational activities and totals c.GBP1.5bn.

Fixed price tariffs could trap customers on higher bills

The second Warm This Winter Tariff Watch report has revealed that the energy market has 337 fixed price tariffs that are more expensive than the current Ofgem price cap. 206 tariffs will still be more expensive than the predicted January price cap.

Consumers on these tariffs will be paying a penalty for having fixed their energy bills and with an average exit fee of £138, many households could feel trapped into remaining on tariffs which now represent a bad deal.

The report also reveals an unwelcome league table of the exit fees some energy firms charge for leaving a tariff early. [1]

Just one in twenty (6%) British Gas tariffs come with no exit fees – and the firm’s average exit fee is £62. Among the other main suppliers, 12% of EONs tariffs have no exit fees, 14% of EDF and 15% of Ovo’s tariffs are free of exit fees.  Ecotricity, Utility Warehouse, So Energy also had small proportions of their tariffs with zero exit fees.

On the other hand, almost all tariffs for Good Energy, Octopus and Cooperative Energy come with no exit fees. However, one smaller supplier, Ecotricity, charges the highest exit fees, averaging £150.

As unit costs have come down in recent months, but are expected to increase again in January 2024, the report reveals that customers could save money over the next 12 months if offered a “one year fixed” tariff with unit rates and standing charges below the current price cap. [2]

These rates for a direct debit customer are as the below:

  • Standing Charges: Electric 53 p/day, Gas 30 p/day
  • Unit Rates: Electric 27 p/kWh, Gas 7 p/kWh

However, the analysis shows there just ONE dual fuel fixed tariff currently on the market is below these levels. For the best variable deal, the report authors predict that the current best offer could be with two different suppliers.

The report also reveals that energy firms’ operating costs are making up £242 (an average of 13%) of customers’ bills.

In an analysis of firms’ operating costs, the report reveals that energy firms may be spending almost as much on marketing, which includes sponsoring football teams, event venues and creating TV adverts (c.11% of operating costs), as they do on operating customer contact centres (c.12% of operating costs).

Operating costs, which go into the standing charges paid by households, also consist of central overheads, such as office rents and the cost of maintaining energy meters.

The report also reveals that suppliers are now expected to make an additional £140m in profit on the nation’s energy bills over the next 12 months, thanks to changes to the Ofgem price cap which came into force on 1 October.

The new rules mean that firms now make an average £64.70 profit per customer per year, up by £4.70 per customer. The projected 12 month profits for all energy suppliers has hit £1.88bn, an increase of £140m from the previous Warm This Winter Tariff Watch report (an 8% increase).

The predictions are in addition to any profits which firms have already made in 2023, which stand at a conservative estimate of over £2bn. [3]

A spokesperson for the End Fuel Poverty Coalition, commented:

“With energy prices subject to change, customers should exercise extreme caution when thinking about switching and fixing and we would call on companies to waive exit fees so people can switch easily to the cheapest tariff available.

“And while households suffer, the Government sits on its hands and refuses to introduce longer term tariff reforms which could bring down bills and help people stay warm this winter and every winter.

“Indeed, with the Prime Minister recently halting work to improve the energy efficiency of buildings, Britain’s households will be trapped in cold damp homes for years to come.”

Fi Waters, spokesperson for the Warm This Winter campaign which commissioned the report, said:

“Energy firms spending £242 per customer on operating costs adds insult to injury for UK households struggling to stay warm this winter. Customers should not be subsidising fancy headquarters, entertaining and marketing when these companies are making billions. That money should be used to end energy debt and lower bills. It’s yet another example of our broken energy system which the government and energy firms seem to be in denial about.”

ENDS

This press release refers to England, Scotland and Wales only. For full details, methodology and sources, read the full report available at: https://www.endfuelpoverty.org.uk/wp-content/uploads/Tariff_Watch_2_Final_Oct_2023.pdf

[1] Minimum, maximum and average single fuel exit fees per supplier for fixed tariffs in the last two years.​​

Energy firm Minimum exit fee Maximum exit fee Average exit fee Count of zero exit fee tariffs % with zero exit fees
Ecotricity £100 £200 £150 0 0%
Utility Warehouse £25 £75 £46 0 0%
So Energy £5 £75 £27 0 0%
Shell Energy £30 £75 £44 1 1%
British Gas £30 £100 £62 7 6%
E.ON £25 £30 £29 3 12%
EDF Energy £15 £200 £66 29 14%
OVO Energy £30 £75 £37 30 15%
SSE £30 £75 £40 19 33%
ScottishPower £30 £150 £66 66 40%
Outfox the Market £30 £300 £62 24 47%
Sainsbury’s Energy £30 £30 £30 9 69%
Affect Energy £75 £75 £75 25 93%
Ebico Living £75 £75 £75 33 94%
Co-operative Energy £75 £75 £75 85 98%
Octopus Energy £75 £75 £75 249 99%
Good Energy £0 £0 £0 4 100%

[2] Best tariff prices correct as of 2 October 2023. The energy market is constantly changing and customers should always check for the best deal based on their actual usage. The information on suppliers is solely a reflection on tariff prices and takes no other factors into account (e.g. customer service levels, support for vulnerable households etc). Households should always think before they fix. 

Advice provided in this press release should not be seen as formal financial advice. Energy prices are volatile and subject to significant changes at short notice. Ofgem updates its price cap calculations every quarter. Future Energy Associates advise that households who suspect they may be on overly expensive energy tariffs should explore alternative options on price comparison websites, consult with their energy suppliers, or seek guidance from consumer advocacy groups, such as Citizen’s Advice to determine the most suitable steps for them.

[3] Declared profits from 2023:

Among the firms which also provided energy, but whose supply side profits are harder to quantify EDF, profits lept to £2bn (€2.3 billion) in the first half of 2023. Ofgem is consulting on plans to make profits reporting more transparent.

Energy suppliers could bank £1.74bn profit in next 12 months

Household energy suppliers could rack up £1.74bn in profits over the next 12 months from customers’ energy bills.

Over the previous six years, suppliers have seen the amount of profit they are allowed to make every year on the average customer on the variable tariff surge from £27 in spring 2017 to a high of £130 in early 2023. The figure currently sits at £60 per customer. [1]

With energy bills expected to remain close to current levels, the energy firms are set to continue to profit from so-called EBIT and headroom allowances in the price cap. [2]

The figures and predictions exclude any profits which firms may also make through Ofgem decisions relating to Covid and Ukraine allowances, which contributed to the recently announced high profits for British Gas and Scottish Power.

The figures come from the first Warm This Winter Tariff Watch report, produced in partnership with Future Energy Associates (FEA). The study has revealed the secret data behind Britain’s broken energy system. Campaigners plan to run the report quarterly as the energy crisis continues.

While energy prices are subject to change and customers should exercise extreme caution when thinking about switching and fixing, FEA experts forecast that there are some deals worth looking at for some households. 

For example, from 1 July, some one year fixed price tariffs with a low exit fee (below £80) and unit charges of 6.5 p/kwh for gas (gas standing charge 29 p/day) and 30p/kwh for electric (electric standing charge 52 p/day) might be worth some high-use energy users considering switching to. [3]

The FEA experts predict that the current best variable deal could be with two different suppliers, Home Energy for gas and Fuse Energy for electricity which would save £93 a year for direct debit households when compared to the Ofgem Price Cap. [4]

Throughout the first few months of 2023 there were just 5 fixed tariffs available to small sections of the market. So far in July alone, this number has doubled, with 10 fixed tariffs newly available on the market.

In April 2023 there were 26 energy suppliers offering customers tariffs, which increased to 29 in July 2023.

A spokesperson for the End Fuel Poverty Coalition, which is part of the Warm This Winter campaign, commented:

“This report shines a light on the murky depths of Britain’s broken energy system. Without fundamental overhaul of the energy grid and energy tariffs, households will continue to lose out while suppliers will profit.

“Energy supplier profits predicted for the next 12 months could easily cover the cost of a ‘help to repay’ energy debt scheme and leave quarter of a billion pounds left over.

“But in addition to network reform and immediate support, we also need to see urgent and sustained action to reduce our reliance on high levels of energy consumption, such as improving the energy efficiency of homes, driving an increase in cheap renewables and a move away from the fossil fuel profiteers of the past.”

Tessa Khan, Director of Uplift, said:

“The government seems to think the energy crisis has gone away, but for millions of households this winter will be as hard as the last. For energy companies to be pocketing this money, when bills are still twice what they were and so many people are being pushed into energy debt, is completely unacceptable.

“People will rightly ask what this government has done over the past year and a half to fix Britain’s broken energy system and lower bills for good. Instead of looking after the bottom line of the big energy companies, it needs to help people save money with more support for insulation and get on with ramping up cheaper renewables. That’s the only way we’re going to see permanently lower energy bills.”

Dylan Johnson from Future Energy Associates added:

“Our report reveals that the retail energy market is experiencing swift changes: falling wholesale prices are influencing retail costs, more fixed tariffs are available, and new suppliers are entering with innovative tariffs. Yet, questions persist over the speed of these changes, supplier profiteering, and regulator’s role in promoting competitiveness. The emergence of competitive single-fuel deals, while exciting, may pose risks to households less vigilant of tariff prices.”

Another injustice highlighted in the Warm This Winter Tariff Watch report are regional variations in the cost of energy. The figures shine a light on those areas of the country who are losing out because of regional inequalities at the hands of suppliers and Distribution Network Operators (DNOs). On the standard variable tariff:

  • Electricity: The average standing charge is 56.85 p/day (pence per day), and the average unit rate is 32.1 p/kwh (pence per kilowatt hour). Manweb, which covers Merseyside, North Wales and parts of Cheshire, has the highest standing charge for electricity at 65.8 p/day, while London has the lowest at 41.9 p/day. Seeboard (South East) had the highest unit rate at 33.2 p/kWh, and Yorkshire the lowest at 31.1 p/kWh.
  • Gas: The average standing charge is 33.5 p/day, and the average unit rate fell by 27.7%. For gas, Scottish Power and Scottish Hydro have the highest standing charges of at 33.9 p/day (£124/year). For unit rates, Swalec (South Wales) is the most expensive region with average unit rates of 7.73p/kWh and East Midlands is the cheapest gas region with unit rates of 7.34p/kWh.

Further data on the impact of standing charges will be published in future Warm This Winter Tariff Watch reports, but overall electricity standing charges remained unchanged from April to July. There was evidence of some early moves from the likes of Fuse Energy to compete on electrical standing charges, but others such as Outfox the Market raised standing charges.

For the gas standing charges, there were no changes from April to July in any of the regions, it remained constant at 29.11 p/day. This is significant as households in July, August and September will still be paying record high standing charges.

Bethan Sayed from Climate Cymru commented:

“Regional variations in energy prices are one of the most unjust parts of Britain’s broken energy system and this report shows wild variations in cost from region to region. These figures shine a clear light on those areas of the country who are losing out. It is time for Ofgem to step in and investigate these discrepancies and provide more transparency on why these differences exist.”

ENDS

Notes to editors

This press release refers to England, Scotland and Wales only. For full details, methodology and sources, download the full report online: https://www.endfuelpoverty.org.uk/wp-content/uploads/FINAL-tariff_watch_final.pdf

[1] Ofgem have allowed profits (Earnings Before Interest and Taxes [EBIT] and the Headroom Allowance Percentage [HAP]) to increase because it’s a percentage of the total bill, which includes wholesale prices. In Q1 2023 (Jan, Feb, Mar), this was up to £130 annually per medium use customer household dual-fuel bill on a single rate, versus £27 in Q2 2017 (Apr, May, June) for the same customer.  Profits have come down as wholesale prices have come down, in Q2 2023, this same customer was paying £98 – still an increase from 2017 of 263%. Other costs are already accounted for in the price cap rising. Values are from Ofgem’s historical cap levels data. All firms offering the Standard Variable Tariff (SVT) were permitted to make this level of profit from customers. Those energy firms that collapsed or posted losses will have done so due to wider customer acquisition coupled with risky hedging strategies or operating issues which negated the profit permitted under the SVT regime.

[2] Cornwall Insight energy bill predictions. Ofgem data shows the number of households on the standard variable tariff. Figure derived from the profit figure in [1] being extrapolated across all 29 million households. This is the level of profit permitted by the Ofgem licence conditions. Energy firms may make more money than this off fixed term tariffs and recent Ofgem allowances for Covid true up and Ukraine Wholesale Cost Adjustments. Equally, firms may declare less profit in annual reports, due to over-running costs in other areas or accounting measures. While energy bills are set to fall back slightly, equally Ofgem are looking to increase the permitted profit margin further, to as much as 2.4% from later in 2023.

[3] From 1 July, a tariff with an annual cost of less than £1,946 (gas unit rate 6.5 p/kwh, gas standing charge 29 p/day, electric unit rate 30p/kwh, electric standing charge 52 p/day) AND which has an exit fee of less than £80 might be worth switching to. This is for households that pay for their fuel through a direct debit and have average energy consumption. Other customers are advised to stay on variable tariffs for now. Advice provided in this press release should not be seen as formal financial advice. Energy prices are volatile and subject to significant changes at short notice. Ofgem updates its price cap calculations every quarter. Future Energy Associates advise that households who suspect they may be on overly expensive energy tariffs should explore alternative options on price comparison websites, consult with their energy suppliers, or seek guidance from consumer advocacy groups, such as Citizen’s Advice to determine the most suitable steps for them.

[4] Best tariff prices correct as of 25 July 2023. The energy market is constantly changing and customers should always check for the best deal based on their actual usage. The information on suppliers is solely a reflection on tariff prices and takes no other factors into account (e.g. customer service levels, support for vulnerable households etc). Households should always think before they fix.

Energy bills could soar for customers on fixed tariffs

While most households saw a slight reduction in energy bills from 1 July, new data reveals that for hundreds of thousands of households, bills will be much higher than the Ofgem Price Cap.

Charts obtained by the Warm This Winter campaign from analysts at Future Energy Associates (FEA), show that households on 274 different tariffs fixed the price of their energy bills at a level above the new Ofgem Price Cap. [1]

The Ofgem Price Cap sets the average household’s energy bills at £2,074, but households on these specific tariffs will only be protected by the Government’s Energy Price Guarantee (EPG) which rose from £2,500 to £3,000 for the average household from 1 July.

Customers on these tariffs will see bills soar by an average of £500 a year. Without the EPG protection, customers on some deals could be paying almost 2.5 times the Ofgem price cap level. [2]

FEA estimate that around 1.5 million energy customers will be affected.

Households affected are customers of a range of firms such as Scottish Power, EDF, Octopus, London Power, M&S Energy, Co-operative Energy, British Gas, Utility Warehouse, Ebico Living, SSE and So Energy. [3]

While households on 52 of the tariffs affected can leave with no penalty, others may be charged to exit their deal early. These exit fees can range from £50 to £400.

A spokesperson for the End Fuel Poverty Coalition, commented:

“This news will send shockwaves through hundreds of thousands of households who thought they were doing the right thing by fixing their energy tariffs.

“It turns out they’ve been taken for a ride by energy firms who may now be charging them more for their energy than people on the Ofgem-fixed standard variable tariff.

“Energy firms must work immediately to end this discrepancy and bring all tariffs into line with the Ofgem price cap or waive exit fees for these customers. If energy firms won’t act, the Government must reduce the Energy Price Guarantee to be in line with the Ofgem Price Cap.”

Tessa Khan, Director of Uplift which is part of the Warm This Winter campaign, commented:

“The murky world of fixed tariffs is just another failing part of Britain’s broken energy system, and shows just how difficult it is going to be for consumers looking to lower their energy bills.

“In the near term, we need Ofgem to investigate how companies have been able to lock customers into extortionate deals. But with prices set to stay high across the board for years to come, only the government can solve our dysfunctional energy system by investing in insulation and cheaper renewables.”

The Ofgem Price Cap affects around 29 million customers on standard variable tariffs (SVTs), including around 4 million customers on prepayment meters (PPMs). Despite a slight reduction in bills from 1 July 2023, these customers will have energy bills that are double what they were in 2020 and 60% above what they were before the invasion of Ukraine. This means that customers will continue to pay similar amounts for their energy as last winter, but with people having less ability to pay as the cost of living crisis continues.

However, Ofgem figures show that around 3 million households are on fixed tariffs and not covered by the Ofgem Price Cap. Future Energy Associates estimate that around 1.5 million of these customers are fixed onto one of the 274 tariffs affected, around 700,000 of these households will be able to exit for no penalty.

On 64 of these tariffs, households were paying less than the £2,500 EPG rate, so will not necessarily see their bills increase, but will still be paying more than the Ofgem Price Cap from 1 July.

Households on 210 of the tariffs will see an increase in bills as they were protected from paying more than the Energy Price Guarantee of £2,500 for an average household in recent months, but that protection changes on 1 July to limit bills to an average of £3,000.

ENDS

[1] The full list of tariffs affected can be made available on request.

[2] For example, “Help Beat Cancer Green Flexi SR October 2023 DM1 Online”. Scottish Power, Exit Fee, £300.0, Annual Cost for DDM £5,426.50. Or 2.5 times the Ofgem Price Cap. Tariff information – ScottishPower.

[3] Utility Week reports that Ovo is maintaining a £2,500 cap for customers. GEUK and Ecotricity have been excluded from the list as their tariffs that are affected have additional rules and regulations in place. However, some tariffs that are not included in the analysis could also be affected as regional price variations could tip their average household costs over the Ofgem Price Cap. Energy firms wishing to update this news story with information on their policies can email info@endfuelpoverty.org.uk.