Tag: Energy Bills

Ofgem price cap change sets sky high energy bills for winter

People will still feel the pain of high energy bills this winter as a new Ofgem price cap comes into force from 1 October 2023. 

Decreases in the unit costs of energy are offset by higher standing charges, the wider cost of living crisis harming people’s ability to pay high energy bills and a lack of financial support from the Government compared to last winter.

The latest Cornwall Insight predictions are that energy bills will increase from 1 January 2024 and stay high throughout the rest of next year.

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

“From 1 October, all households in every part of the country will pay more on energy standing charges, more into the profits of energy firms and many are more in debt to their suppliers.

“Average energy bills are still almost double what they were three years ago and Government help for households, which was available last winter, has been axed. This means this winter will feel worse for many households.

“If Members of Parliament on the House of Commons Energy Security Committee can see problems households will face, why can’t the Government? The MPs’ recent report on tackling the energy bills crisis sets out sensible recommendations to help vulnerable households and Ministers need to implement these ideas immediately.”

Paying MORE on standing charges

  • Standing Charges are paid by customers every day they are connected to the grid – and they are a postcode lottery with customers in Merseyside and North Wales paying significantly more than those in London.
  • Compared to winter 2020/21, daily standing charges for gas are up 8% and for electricity up 119%. The cost of every unit of energy used is also significantly higher:
Daily standing charges and unit costs in pence. 

Based on what the average customer paid (on a standard variable tariff, paying by direct debit).

 Ofgem Price Cap from 1 Oct 21 Ofgem Price Cap from 1 Aug 22 EPG Rate from 1 Oct 22 EPG Rate From 1 Jan 2023 EPG Rate From 1 April Ofgem Price Cap from 1 Jul 23 Ofgem Price Cap from 1 Oct 23
GAS UNIT (kwh) 4.07 7.37 9.9 9.84 10.3 7.51 6.89
GAS Standing Charge 26.12 27.22 28.49 28.49 29.11 29.11 29.62
ELECTRICITY UNIT 20.8 28.34 32.36 32.42 33.2 30.11 27.35
ELECTRICITY Standing Charge 24.88 45.34 46.36 46.36 52.97 52.97 53.37
Source: End Fuel Poverty Coalition records of Ofgem and BEIS/DESNZ data
  • Analysis of Ofgem data by the End Fuel Poverty Coalition, suggests that customers on standard credit terms pay substantially more for their energy than those on direct debit – with gas standing charges 18% higher, electricity standing charges 13% higher and unit costs also c.5% higher:
Uplift from direct debit cost to Standard Credit cost for customers on the standard variable tariff. Ofgem Price Cap from 1 Oct 21 Ofgem Price Cap from 1 Aug 22 EPG Rate from 1 Oct 22 EPG Rate From 1 Jan 2023 EPG Rate From 1 April Ofgem Price Cap from 1 Jul 23 Ofgem Price Cap from 1 Oct 23
Gas Unit Uplift 3.44% 5.29% 7.58% 8.74% 0.00% 5.33% 5.22%
Gas Standing Charge Uplift 27.07% 17.56% 17.73% 17.73% 17.97% 17.97% 18.13%
Electricity Unit Uplift 5.34% 5.33% 7.97% 10.55% 0.00% 5.35% 5.27%
Electricity Standing Charge Uplift 18.53% 12.84% 13.03% 13.03% 12.35% 12.35% 12.48%
Source: End Fuel Poverty Coalition records of Ofgem and BEIS/DESNZ data

Paying MORE into profits of energy firms

  • Ofgem has changed the rules on energy firms profits. This means suppliers are likely to earn 2.4% profit on every average customer’s bill from 1 October – up from 1.9% currently.
  • These new arrangements include a fixed component and a percentage component on top of that, rather than the whole value being a larger percentage of the total bill. Experts from the Warm This Winter campaign calculate that customers will only pay less profit to energy firms than before if their bill is above a staggering £4,000 a year.
  • The Warm This Winter Tariff Watch report estimated that energy firms will rake in almost £2bn in profits over the next 12 months. In addition to the record profits already announced in 2023. 

Many people are MORE in debt to their energy firms

  • Figures from Ofgem revealed that almost 1.2m customers disconnected from their energy supply in the first three months of 2023, while the average household energy debt for homes not on a payment plan is £1,214 on electricity bills and £965 on gas bills. Figures from the Money Advice Trust suggest that this “bad debt” is just the tip of the iceberg.
  • Customers on prepayment meters are especially hard hit by energy debt levels, with data secured under freedom of information requests by 38 Degrees showing that PPM customers are £1bn in debt on their meters, making them more likely to disconnect as their top up amounts are deducted to pay off their debts.
  • Citizens Advice data found that in the first 6 months of 2023, 7.8 million people have had to borrow money to cover their energy bills and 1.2 million children live in households which have had to go without heating, hot water and electricity. The charity has issued a warning that if the Government doesn’t step in, these numbers will rise this winter.
  • The Money Pensions Advice Service also found that nearly one in five buy now, pay later (BNPL) customers have used this payment method for essentials. Case study evidence from the Fuel Bank Foundation reveals that energy customers are also turning to high-interest payday loans to cover their energy costs.

Price cap history chart (source: End Fuel Poverty Coalition records using Ofgem, BEIS / DESNZ and Cornwall Insight data)

Cap change date Average annual household bill change (GBP) Average annual household energy bill (GBP) % change from last period YOY change Change from Pre-Energy Bill Crisis Change from Pre-Ukraine Invasion
01-Oct-20 -120 1042 -10.33% -11.62%    
             
01-Apr-21 96 1138 9.21%      
01-Oct-21 139 1277 12.21% 22.55% 22.55%  
             
01-Apr-22 693 1971 54.35%      
01-Oct-22* 129 2100 6.54% 64.45% 101.54% 64.45%
             
01-Apr-23* 400 2500 26.84%      
01-Jul-23 -426 2074 -17.04% 5.23% 99.04% 62.41%
01-Oct-23 -151 1,923 -7.28% -8.43% 84.55% 50.59%
01-Jan-24** 9.24 1,932 0.48% -7.99% 85.44% 51.31%
01-Apr-24 -64.55 1,868 -3.34% -25.29% 79.24% 46.26%
01-Jul-24 -45.6 1,822 -2.44% -12.15% 74.86% 42.69%
01-Oct-24 52.05 1,874 2.86% -2.54% 79.86% 46.76%

* Figures from 1 Oct 2022 include EPG and EBSS. Figures from 1 Apr 2023 include EPG. 

** Figures from 1 January 2024, the figures use a new “average household” usage calculation. Using the old estimates indicate even more significant increases throughout 2024.

Figures in italics taken from Cornwall Insight and are predictions.

Winter energy crisis inevitable warn MPs

MPs on the House of Commons Energy Security Committee have warned that another winter energy crisis is “inevitable” without further Government support for households.

The cross-party Committee took evidence from organisations, including the End Fuel Poverty Coalition members, energy firms and regulators. The final report acknowledges that more support for energy bills will be needed this winter.

End Fuel Poverty Coalition members put forward examples of dangerous behaviour that households resorted to in order to try and keep bills down last winter. But despite the Government help for households last winter, almost 5,000 excess winter deaths were caused by living in cold damp homes.

In its final report, the Committee recommended that the energy firms improve the customer service and the empathy shown to households this winter – as well as providing a priority crisis line for charities working with the most vulnerable.

MPs also suggested that the Government must take steps to get 2022 Energy Bills Support Scheme cash to households who missed out, extend the Warm Home Discount and reform cold weather payments. It also recommends radical overhaul of standing charges and the introduction of a social tariff for vulnerable households.

The coordinator of the End Fuel Poverty Coalition was one of the experts called to give evidence to the Committee. They commented:

“This is a welcome report full of practical recommendations that could help avert the looming cold homes crisis this winter.

“We’re disappointed there is nothing specific in the report to help the millions of households in debt to their energy firms and who are running just to stand still with their payments. Frontline charities have recently backed proposals sent to ministers to introduce a “Help to Repay” scheme to tackle the growing mountain of energy debt.

“But the big elephant in the room is if the Government will listen to the eminently sensible suggestions from MPs and take urgent action to keep people warm this winter.”

Recently the End Fuel Poverty Coalition wrote to the new Secretary of State to issue a warning about the risks of the winter ahead and to offer additional suggestions to help tackle fuel poverty in the short and long term.

This week the Coalition, which is part of the Warm This Winter campaign, also joined more than 400 organisations to write to the Prime Minister asking the Government to think again about weakening of net zero policies which could cause lasting damage to the UK economy.

For poverty campaigners, the PM’s decision to rule out increased energy efficiency standards comes with serious implications. New Citizens Advice figures revealed that private renters wasted £1.1bn this year on energy that leaks out of their homes, with this figure now set to continue.

A spokesperson for the End Fuel Poverty Coalition said:

“There is a real-life cost to the PM’s posturing – especially for the millions of households who rent from a private landlord. Many will now face high bills and cold damp homes forever after being abandoned by the Government.

“Last winter, the health problems caused by living in cold homes mounted up. The Prime Minister and Energy Secretary should be focussed on providing help for households to survive this winter and improve their living conditions in the long run.

“We need the Government to double down on support for households, including improving energy efficiency and reforming electricity pricing markets to ensure customers can enjoy the advantages of more affordable renewable electricity.”

Energy Secretary warned of perilous winter ahead

Following the new Energy Secretary’s first appearance in front of MPs, ministers have been warned of a perilous winter ahead.

A letter sent by the End Fuel Poverty Coalition to the new Secretary of State comes after the group warned MPs that almost 5,000 excess winter deaths were caused by people living in cold damp homes in the relatively mild winter of 2022/23.

The letter states that “the situation is perilous, the outlook deeply worrying and the need for support with energy bills is increasingly urgent.”

After the new Secretary of State failed to attend the House of Commons Energy Committee last week, her first major intervention since taking office was an article in the Sun which also failed to acknowledge the challenge faced by families this winter. 

And while Rt Hon Claire Coutinho MP answered questions in the House of Commons chamber on long term energy issues, she was silent on the need for help for families this winter.

But alongside longer-term reforms to Britain’s broken energy system, the Government has been urged by campaigners to launch a new “Help to Repay” to tackle energy debt this winter, to reform the Energy Bills Support Scheme (EBSS) Alternative Fund, to move policy costs from energy bills onto general government spending and to bring in a new Extreme Weather Payment.

To bring bills down for the most in need, a new energy cost support scheme (ECSS) has been proposed via the reduction of unit costs and standing charges under the existing Energy Price Guarantee legislation. 

Local authorities could also be supported by investing the underspend in the Energy Bills Support Scheme into Household Support Funds and further work to reform the Private Rented Sector to ensure higher and more enforceable Minimum Energy Efficiency Standards.

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

“The Government appears to have abandoned plans to consult on reform of energy tariffs which could help protect the most vulnerable from the worst excesses of the energy market. This means they must bring in support to help people trapped in energy debt now and introduce an emergency tariff for vulnerable households this winter. We believe this is more than possible using existing legislation.”

Tessa Khan, director of Uplift, commented:

“While the minister is obsessed with nuclear fusion, oil and gas, the Government is ignoring the plight of millions of people facing a winter in cold damp homes. What the Secretary of State should be focussed on is helping people to insulate their homes, unblocking cheaper onshore renewables and bringing down our energy bills.”

ENDS

The full letter is available to read online (pdf) and is below.  It was sent on 8 September 2023.

On behalf of the End Fuel Poverty Coalition, congratulations on your appointment as Secretary of State for Energy Security and Net Zero.

We appreciate that you will be incredibly busy with the volume of vital decisions that are in your in-tray. And we know from recent polling that policies to reduce energy bills are seen by voters as the best way to tackle the cost of living crisis.

It is vitally important that the right decisions are made to reform Britain’s broken energy system. As we explained in evidence to the House of Commons Energy Security Committee this week, the situation is perilous, the outlook deeply worrying and the need for support with energy bills is increasingly urgent. 

We were disappointed that the previous Secretary of State abandoned plans to consult on reform of energy tariffs which could help protect the most vulnerable from the worst excesses of the energy market in the long term. We hope you will recommit the Government to this vital consultation on a social tariff – and introduce reforms before the Energy Price Guarantee protections end in Spring 2024. You can read our letter to the Speaker of the House of Commons online [pdf link].

As an immediate priority, the Government must commit to providing a targeted package of support to help the most vulnerable stay warm this winter:

  • Introduce the widely supported “Help to Repay” proposals to tackle energy debt
  • Move policy costs from energy bills to be covered by general government spending
  • Support local authorities by investing the underspend in the Energy Bills Support Scheme into Household Support Funds
  • Reform and re-run the Energy Bills Support Scheme (EBSS) Alternative Fund
  • Deliver a new Extreme Weather Payment of £6.50 per day for every day the Met Office declares the temperature will drop below -4 degrees Celsius (with the potential for a similar equivalent for summer months also investigated)
  • Ensure that all households who received the Warm Homes Discount in winter 2021/22 can access a £150 rebate this winter, regardless of the new process introduced in winter 2022/23 which uses an algorithm to decide who benefits.
  • Provide a new energy cost support scheme (ECSS) for households most in need of support applied directly to energy accounts (for example via the reduction of unit costs and standing charges, which can be done using existing Energy Price Guarantee mechanisms).
  • Ban the forced transfer of homes to prepayment meters and end the Government’s dereliction of duty on this issue.
  • Work with housing ministers to reform the Private Rented Sector to ensure higher and more enforceable Minimum Energy Efficiency Standards

 At the moment, many of the other vital reforms needed to reduce energy bills are seen as longer term, but the reality is that decisions need to be taken now to:

  • Speed up reforms to ensure customers start enjoying the advantages of more affordable renewable electricity options, and that their electricity rates are no longer subject to the unpredictable cost fluctuations of fossil fuels. 
  • Turn the current crisis into an opportunity to engage households in a large-scale retrofitting programme, investing in an emergency roll out of cheap energy saving measures that could permanently cut energy bills by hundreds of pounds.
  • Address UK energy security and independence by quickly weaning the UK off its dependence on oil and gas and ending subsidies for fossil fuels, using the money to support a fair transition, invest in immediate support for vulnerable households and long term measures to reduce the cost of energy and make the UK supply more secure.
  • Ensure Ofgem works with energy firms to improve standards of customer service at energy firms, holding them accountable for contact ease, success and empathy. This means customers can get in touch with their energy supplier to resolve issues easily, that problems are solved in one contact and that customers are treated with respect and understanding throughout all forms of communication from the energy firm. 

 We look forward to working with you in your role and if you would like to discuss any of the issues we have raised, please do not hesitate to contact us via our coordinator.

Yours sincerely,

The End Fuel Poverty Coalition

 

Almost 5,000 excess winter deaths caused by cold homes last winter

The House of Commons Energy Security and Net Zero Committee has heard estimates that there were 4,706 excess winter deaths in 2022/23 caused by living in a cold home in England, Scotland and Wales. [1]

The figures, compiled by the End Fuel Poverty Coalition using official data, were presented to MPs at the Committee’s inquiry into Government preparations for winter.

At the same time, a report card by the Warm This Winter campaign on the Government’s progress against 8 key measures to tackle the energy bills crisis, has revealed that on half of these measures Ministers are making no progress. [2]

The report card shows that on 3 measures rapid progress is needed, but on one measure, the Government has actually gone backwards, by taking steps that will deepen the country’s reliance on expensive fossil fuels.

Meanwhile, mounting evidence suggests that a new class system is emerging in Britain, based on access to energy.

Fewer than 5m of the UK’s 28m households could be classed as being in the “energy elite” and unaffected by the current energy bills crisis. Around 8m have to borrow money to pay their energy bills and over 1m have disconnected for periods this year. [3]

The rest of the population are also subject to high energy bills, which have doubled in the last three years. Among this wider group, people have used up savings and cut back on essentials to keep the lights and heat on. With winter approaching and the cost of living crisis continuing, the ability of people to pay sky high energy costs is severely diminished. [4]

The health implications of living in cold damp homes are severe. In addition to contributing to excess winter deaths, existing medical conditions are made worse and a new pan-European study found that two-thirds of people in fuel poverty experience debilitating depression or anxiety. [5]

The End Fuel Poverty Coalition was among consumer groups giving evidence to the Committee:

A spokesperson for the Coalition also commented:

“The public see tackling the energy bills crisis as the main way the Government can help ease the cost of living crisis, but sadly ministers have been making slow or no progress on the policies needed to keep people warm this winter and the next.

“Thousands of people die every year in cold damp homes and countless more turn to the NHS as existing health conditions worsen due to living in such conditions. Fuel poverty is a public health crisis, but it can only be addressed by economic and engineering solutions.

“Many of the solutions do not need to place extra burden on the Treasury and we expect MPs to ensure ministers and the energy industry do much more to help those most in need this winter.”

Tessa Khan, executive director of Uplift, which is part of the Warm This Winter campaign, added:

“Energy is now barely affordable for a majority of households in the UK, and millions of people are saddled with energy debt or have had to disconnect because they are simply priced out of today’s energy market. 

“While it helped pay our bills last year, this government has done nothing to fix Britain’s broken energy system. There’s been next to no progress on insulating homes or unblocking the barriers to cheaper renewable energy. Instead, we’ve had a lot of hot air over new North Sea drilling, which will do nothing to lower people’s bills. The real solutions are obvious, the government is just failing to act.”

Jonathan Bean, spokesperson for Fuel Poverty Action said: 

“The country will never forgive a government that allows energy firms to profiteer whilst children go hungry and their grandparents are left shivering in their beds. And now Ofgem is planning to allow homes to be broken into again this winter to install prepayment meters – terrorising those struggling to stay warm.”

ENDS

The House of Commons Energy Security & Net Zero Committee Inquiry starts at 1000 on Wednesday 6 September and can be viewed online:

https://committees.parliament.uk/event/19027/formal-meeting-oral-evidence-session/

[1] Excess Winter Deaths (EWDs) for winter 2022/23 data taken from provisional tables from:

  • Office of National Statistics (table 11, England: column J, lines 13-16 = 18,142 EWDs. Wales: column J, lines 37-40 = 1,324 EWDs) 
  • National Records of Scotland (link, table M1, col. N, lines 221-224 = 2,424 EWDs). 
  • Institute of Health Equity methodology suggests that 21.5% of EWDs are caused by living in cold homes. 

Applying the IHE methodology to EWDs, means that the number of EWDs caused by living in cold damp homes are: England 3,906, Scotland 521, Wales 285. Total 4,706. 

All data is flagged as provisional. NI data not available yet. Winter is defined as December, January, February and March.

Comparative number for winter 2021/22 (i.e. excluding NI) is 3,186. Previous years data sourced from ONS and NRS and collated by EFPC and published online.

[2] The Warm This Winter Report Card, summary below.

Help for people THIS WINTER

Provide more financial support for those most in need 

Is the government fixing it? NO PROGRESS

Tackle the growing energy debt mountain

Is the government fixing it? NO PROGRESS

Stop forcing people onto more expensive pre-payment meters

Is the government fixing it? NO PROGRESS

An affordable ‘social tariff’ for people priced out of the market

Is the government fixing it? NO PROGRESS


Lowering energy bills FOR GOOD

Reduce bills for good with a nationwide insulation drive

Is the government fixing it? RAPID PROGRESS NEEDED

Lower electricity costs by developing more renewable energy 

Is the government fixing it? RAPID PROGRESS NEEDED

Reduce the UK’s reliance on expensive gas imports

Is the government fixing it? GOING BACKWARDS

Claw back excessive profits 

Is the government fixing it? RAPID PROGRESS NEEDED

The full report card and source data is available: https://www.endfuelpoverty.org.uk/about-fuel-poverty/september-2023-fuel-poverty-stock-take/

[3] 28.2m ONS household data. 16% of the population have been able to maintain usual spending so far, and expect to be able to continue to do so (YouGov, July 2023), which is also supported by Grant Thornton figures on projected household expenditure in 2021/22 (suggested that 14% of households are financially immune from cuts). 

8m figure from Citizens Advice. 1m figure from Ofgem based on Q1 2023.

[4] “Used up savings” (Bank of England, as reported by Press Association, 29 June 2023), “cut back on essentials” (YouGov, July 2023).

[5] Latest health resources and evidence cited on the End Fuel Poverty Coalition website. Two thirds of people in cold damp homes suffer from anxiety or depression according to a Europe-wide study by the Wellbased group of academics [pdf].

Energy bills a voter priority as new Secretary of State appointed

Key swing voters say policies to tackle the cost of living crisis are critical to their voting intentions in the next election, but neither major party has the confidence of voters on the issue.

As a new Secretary of State for Energy Security and Net Zero has been appointed, the report finds that the cost of living crisis is the number two issue determining how people will vote at the next election, with 50% of all voters choosing it as a priority issue, just behind the NHS.

The figures from YouGov on behalf of the Stop the Squeeze campaign reveal that bringing down the cost of energy for households is the number one solution to the crisis people would like to see.

Overall, 58% of voters would like to see policies enacted to bring down the cost of energy bills – by far the most popular option to tackle the cost of living crisis, with cutting VAT the second favourite on 28%. The report authors found that this option performs consistently well among all types of voter demographics and across voters of all parties.

Sam Tims, senior economist at the New Economics Foundation (NEF) said: “Ahead of the next election voters’ priorities are clear: they want politicians to offer up bold solutions to tackle the cost of living crisis. Energy bills, housing costs and wages will be at the forefront of people’s minds.

“There is a golden opportunity for any political party that can offer voters both a short term-plan to support people through the cost of living crisis and the long-term change we need to improve living standards for good.”

The Prime Minister has reshuffled his top team ahead of the next General Election with Claire Coutinho replacing Grant Shapps as Energy Secretary. A spokesperson for the End Fuel Poverty Coalition, commented:

“Claire Coutinho’s inbox is already groaning under the weight of vital decisions which need to be made to reform Britain’s broken energy system.

“Energy bills remain at record levels with every unit of energy costing double what it did in winter 2020/21, with daily standing charges also increasing and customers in record levels of energy debt.

“As well as securing financial support to help people stay warm this winter, the new ministerial team will need to amend the Energy Bill to ban the forced transfer of households onto prepayment meters and improve the energy efficiency of rented properties.

“Previous ministers appeared to abandon plans to consult on tariff reform to help the households most in need and who most rely on energy to keep themselves safe. The new Secretary of State has an opportunity to recommit the Government to a social tariff and make meaningful long term change to people’s energy bills.

“The Secretary of State also needs to speed up reforms to the electricity market to ensure customers quickly enjoy the advantages of more affordable renewable energy, and so that their electricity rates are no longer subject to the unpredictable cost fluctuations of fossil fuels.

“There is also the opportunity for ministers to turn the current crisis into an opportunity to engage households in a large-scale retrofitting programme. They must also look at addressing UK energy security and independence by weaning the UK off its dependence on oil and gas and ending subsidies for fossil fuels, using this money to support a fair transition onto cleaner heat.”

ENDS

Download the full report as a pdf here: https://uploads-ssl.webflow.com/63357e2a3f369bd320e28ebe/64ef655fbbd961fcdb5441cd_The%20Bottom%20Line%20polling%20report%20FINAL.pdf

Price cap sees energy costs double in three years

The latest Ofgem price cap announcement has set energy prices for 29m households for October, November and December 2023. 

In the detail of the figures it shows that, when compared to winter 2020/21, the cost of every unit of energy used is around double what it was. Daily standing charges for gas are up 8% and for electricity up 119%.

Compared to last winter, unit costs are down 30% for gas and 15% for electricity, but daily standing charges are up 4% for gas and 15% for electricity, while the Energy Bills Support Scheme has been withdrawn (which was worth about 16% of an average bill).

Ofgem has also confirmed that energy firms can increase the amount of profit they make through the price cap by c.£2 a year for every average customer on the standard variable tariff.

A spokesperson for the End Fuel Poverty Coalition, commented:

“When you look at the details of this price cap, the reality is that every unit of energy a customer uses costs double what it did a few years ago. The daily standing charges customers pay have also increased – doubling in the case of electricity.

“The Energy Bills Support Scheme has also been taken away this winter, while energy firms have been allowed to increase the profits they make per customer and vulnerable households have been left wondering what will happen this winter and beyond.

“Meanwhile the cost of living crisis continues to hit households hard and everyone now has less ability to pay these high energy prices. Energy debt levels continue to surge and reports from several charities and think tanks in recent days have set out just how dangerous this winter will be – especially for the most vulnerable.”

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

“The government seems to think the energy crisis has gone away, but for millions of households this autumn will be as hard as the last.

“People are still paying double what they were just a few years ago, and for some households their bills will be more than they were last year because of the lack of government support and rising standing charges. Levels of energy debt are also soaring.

“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 bowing to the wishes of profiteering oil and gas giants for more drilling, which won’t lower our bills, 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.”

Jess Ralston from ECIU commented:

“Unfortunately we’re not out of the woods yet as gas prices are expected to stay at least 2x higher than pre-crisis levels in the longer term, and while lots of Europe has moved away from gas altogether we’re still reliant on it. Last year the IMF said that this reliance is why we were hit harder than other countries.

“Those in the most inefficient homes could pay around £720 more on bills over the next year than those in energy efficient ones. We could have spent the last year insulating houses to shield them from future gas price spikes, and building more British renewables so we need to buy less expensive gas on the open market. Instead there seems to have been a focus on the North Sea, which won’t bring down bills.

“The Government’s flagship insulation scheme has flatlined this year, so getting it back up and running could help people in time for this winter and fulfilling pledges to tighten energy efficiency regulations for private renters and lifting the ban on onshore wind could help in time for next winter. Using less gas is the key to lower bills and energy security.”

National Energy Action (NEA) have warned that 6.3 million households could be trapped in fuel poverty this winter. It is somewhat less than last year, but far ahead of the 4.5 million in October 2021. Chief executive Adam Scorer commented:

“The price cap does not protect those who simply cannot afford the cost of keeping warm. The UK Government can still act – by directly reducing energy bills via targeted energy discounts or a more targeted Energy Price Guarantee for low-income and vulnerable households.

“It knows how to do it. It has millions of pounds unspent from previous schemes. It is aware that failing to act will consign millions to another winter of despair and suffering.”

The End Fuel Poverty Coalition recently wrote [pdf] to the Speaker of the House of Commons and the chair of the Commons Energy Security & Net Zero Committee to highlight the five occasions in 2023 when leading members of the Government, including the Prime Minister, promised to consult on the introduction of a social tariff.

In the recent policy paper, “Delivering a Better Retail Energy Market”, there is no mention of social tariffs or the introduction of discounted tariffs for the most vulnerable.

While there are some references to vulnerability and tariff innovation in the recently published consultation “Towards a more innovative energy retail market”, there is no mention about how the retail market needs to be reformed to provide vulnerable households with access to the energy they need and additional protections they may need in a market-led approach to energy supply.

The End Fuel Poverty Coalition has urged MPs to hold the Government to account and ensure that the introduction of a form of “social tariff” from April 2024 (or alternative consumer protection for vulnerable customers, such as “energy for all,” the National Energy Guarantee or a Energy Costs Support Scheme), will be considered by the Government as a matter of urgency.

The End Fuel Poverty Coalition spokesperson continued:

“Ministers had promised to consult on tariff reform to help the households most in need and who most rely on energy to keep themselves safe. Sadly, they have abandoned plans for a social tariff consultation.

“The Government seems to be running out of enthusiasm to help people get through the energy bills crisis, and it is also now running out of time to act to keep people warm this winter.”

Notes:

Data available: End Fuel Poverty Coalition unit cost increases

Trading firm fine highlights role of markets in energy bills

The energy regulator has handed out its first fine to an energy market trading firm under new rules.

Morgan Stanley has been fined £5.4m by Ofgem for breaching rules that require firms to record messages linked to energy trading. The records are expected to be kept due to transparency rules that help protect consumers against market manipulation and insider trading.

But Ofgem found that between January 2018 and March 2020, energy traders discussed business over WhatsApp on private phones which went against the rules. Ofgem bosses said that this represented a “significant compromise of the integrity and transparency of wholesale energy markets.”

Wholesale energy markets underpin the nation’s energy bills and so anything which impacts on these prices is of concern to all households and businesses. Under the current system, units of energy are traded on financial markets – or churned to use the industry language – by firms such as Morgan Stanley.

The latest available Ofgem data (June 2023) shows that every unit of gas is churned on the markets 13 times and every unit of electricity is traded three times.

Churn shows how often a unit of energy is traded before it is delivered to end consumers – it is calculated by dividing the total volumes traded by the total amount of energy delivered.

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

“It’s welcome that Ofgem has taken action against this type of behaviour. But action on this particular case should remind us about wider concerns about the role of energy market trading.

“Every act of trading energy on the markets usually results in profit for the traders and ultimately adds to our bills. Units of energy can be traded several times before reaching our energy suppliers.

“We need to continue to ensure we have as much transparency as possible about all the firms who contribute to Britain’s broken energy system.”

What will Ofgem’s winter price cap show?

On Friday 25th August at 0700, Ofgem will announce the energy price cap which will apply to household bills from 1 October 2023.

In a major change, the values which the regulator uses to calculate the “average bill” will change (known as TDCVs, typical domestic consumption values). Due to better energy efficiency and rising energy costs, average energy consumption has fallen.

But this means that in order to compare this winter to last, households will need to look at unit costs and standing charges.

The End Fuel Poverty Coalition has compiled average unit costs and standing charges for direct debit customers over previous years to enable a true comparison with the data Ofgem will publish.

The figures below are based on price cap prices in effect on 16 August, forecasts are that these will vary slightly from 1 October and the figures will be updated after the Ofgem announcement.

Looking back to before the energy bills crisis started in winter 2020/21:

  • Gas unit costs are up 115% and daily standing charges are up 6% in comparison to winter 2020/21
  • Electric unit costs are up 141% and daily standing charges increased 117%

Compared to winter before Russia invaded Ukraine in winter 2021/22:

  • Every unit of gas is 85% higher today than in winter 21/22 and the gas standing charge is 11% higher.
  • Every unit of electricity is 45% higher today than winter 21/22 and electricity standing charge is 113% higher.

For winter last year, the prices are compared with the Energy Price Guarantee rate which was in effect.

Energy UNIT costs have come down from last winter (-24% for gas and -7% for electricity). However, STANDING CHARGES have increased from last winter (+2% for gas and +14% for electricity).

In addition, the Government’s Energy Bills Support Scheme has ended. This kept the average bill 16% below the Energy Price Guarantee rate. Therefore, people will not feel any reduction in unit costs as the EBSS money has been taken away from them this winter.

Of course, households are also battling record prices for all other essentials and facing record household energy debt levels.

The prepayment meter (PPM) premium which added around 10% to these people’s bills will be eradicated for some customers and PPM users will be paying roughly the same as DD customers. But for those on standard credit, the price premium continues and these customers will pay about 10% more than DD and PPM customers this winter.

A spokesperson for the End Fuel Poverty Coalition commented:

“Even after next week’s Ofgem announcement, energy unit costs will still have more than doubled since winter 2020/21 with standing charges also rising. For electricity, the situation is even worse thanks to Britain’s broken energy system which fails to pass on the cheaper cost of renewables to the customers and daily electricity standing charges have doubled.

“Looking at a year on year comparison, any declines in wholesale costs are almost cancelled out by the end of the Government’s Energy Bills Support Scheme which means bills stay at similar levels to last year while people have less ability to pay these stubbornly high prices.

“This coming winter will not feel any better than last.”

Notes

Data applies to England, Scotland and Wales only. GB averages. Where an Energy Price Guarantee Rate superseded an Ofgem Price Cap rate, this has been taken into account. Figures for winter 2022/23 do not include the Energy Bills Support Scheme.

Updated text on 24 August 2023. New evidence from the Environmental Change Institute at the University of Oxford have revealed errors in Ofgem’s data sets for the winter 2020/21 unit costs so these prices have been revised. It means that both electricity and gas unit costs have more than doubled. Full data is available on request.

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.

Prime Minister admits energy bills are causing businesses to fold

Rishi Sunak admitted on LBC radio that businesses are being forced to shut down because of high energy bills, but campaigners say government failings are leading to persistently high costs.

The UK’s high dependency on gas for heating and generating electricity has meant that the UK has some of the highest energy costs in Europe. Government support for businesses and households helped reduce bills last winter, but support for both has been reduced significantly, with funding for businesses slashed from £18bn for a six month scheme to £5.5bn for the 12 months to March 2024. 

Campaigners from Warm this Winter, which is urging the government to provide more support for energy bills and a coherent plan to move the UK away from volatile fossil fuels through a national rollout of home insulation and affordable renewables, point to bumper-profit making energy firms operating in a system designed by ministers. Despite falling wholesale prices, energy bills this winter are expected to still be nearly twice what they were in 2021.

A spokesperson for the End Fuel Poverty Coalition said:

“Finally the PM has woken up to the fact that energy bills are causing households to struggle and businesses to close – including those in his own constituency.

“But energy firms are allowed to make huge profits from our misery because of his own Government’s refusal to fix Britain’s broken energy system.

“It’s not a question of either Government policies or energy bills wrecking the country, they are one and the same thing! The PM should be standing up for small businesses and households who are facing mounting energy debts, even before winter starts.”

The government’s recent announcement of 100 new oil and gas drilling licences has come under heavy criticism, in part because it will do nothing to lower UK energy bills. The regulator issuing these licences says it will only make a difference to gas production ‘around the edges’, and any increase in UK production will take years to come online and even then will be sold at market rate either to the UK or overseas.

Tessa Khan, executive director of Uplift, added:

“Rishi Sunak is blaming energy bills for businesses in the UK going under, yet his government is doing nothing to bring them down.

“His plan to increase North Sea oil and gas production will do precisely nothing to cut UK energy bills. All it will do is increase the already obscene profits of huge, international oil and gas companies. Whatever they manage to take out of the North Sea, and it won’t happen for years, they will sell to the highest bidder, whether that’s overseas or here in the UK. The only way to lower bills permanently is by helping people save energy and a massive increase in cheaper, homegrown renewable energy.

“The Prime Minister seems to think that unaffordable energy bills are a laughing matter that can be batted away. Millions of households and businesses are struggling today with high energy costs and this winter will be even worse because, while bills are dropping slightly, prices are still nearly double what they were, energy debt levels are soaring and the government has all but withdrawn its help.

“People will rightly ask what has the government actually been doing for the past year and half to fix the UK’s broken energy system?”