Tag: Ofgem Price Cap

Energy bills crisis has cost the average household £2,300 each

The average household has spent £2,300 more on energy bills since April 2021 than they would have done had prices remained stable. [1]

The data takes into account the Government support schemes that were set up to help households and means that, across the whole country, the additional spend by households on energy over the last three years totals more than £68bn.

The new figures calculated by the End Fuel Poverty Coalition come as Ofgem has lowered the price cap by around 12% for domestic energy bills.

However, the new cap level means that gas and electricity costs remain 60% higher than in 2021 when the energy bills crisis began. [2] 

Meanwhile, households are still struggling in record levels of debt, with over 3 million households owing money to their energy firm.

New research by YouGov for the Stop The Squeeze campaign found that 61% of respondents – including 70% of Conservative voters – chose energy bill support as one of the interventions they would most like to see. [3]

Energy bill support was found to be more than twice as popular as cuts to taxes on wages (29%) and has gained in popularity among voters since the last time the research was conducted in July 2023.

However, the Government is set to end both the Energy Price Guarantee and the Household Support Fund on 31 March 2024. 

The Energy Price Guarantee currently protects households from fluctuating global energy markets and could also be used to introduce an Emergency Energy Tariff to help those struggling the most with the high cost of energy.

The Household Support Fund provides local authorities with additional resources to help communities most hit by high energy bills, with 26 million grants given by councils to households struggling to afford the essentials. The End Fuel Poverty Coalition was recently among 120 organisations that signed a letter to the Chancellor calling for the Fund to be extended by at least another year.

Simon Francis, coordinator of the End Fuel Poverty Coalition, commented:

“Even after this latest change to the price cap, energy prices remain 60% higher than they were before the energy bills crisis began.  

“Three years of staggering energy bills have placed an unbearable strain on household finances up and down the country. Household energy debt is at record levels, millions of people are living in cold damp homes and children are suffering in mouldy conditions.  

“Everybody can see what is happening in Britain’s broken energy system and it is time for politicians to unite to enact the measures needed to end fuel poverty. This includes cross-party consensus on a long-term plan to help all households upgrade their homes and short-term financial support for households most in need.”

Megan Davies from Stop the Squeeze said:

“The fact that the public appetite for energy bill support is rising, not falling, should be a wake up call to the government that the cost of living crisis is far from over.

“Any fall in the price cap is of course welcome, but it is no substitute for the structural reform to the energy market that is needed to guarantee more affordable clean power into the future.

“This Budget could be the government’s last opportunity before the election to listen to the public and show they are serious about taking action on energy bills.”

Warm This Winter campaign spokesperson Fiona Waters commented:

“It’s clear Britain’s energy system is broken with a few firms making obscene profits while ordinary people suffer and household energy debt at record levels. What’s worse, millions, including the elderly and children, are living in unhealthy cold damp mouldy homes. 

“People are tired of this constant cycle and want action. What politicians should be focussed on is bringing down energy bills through a proper programme of insulating homes and investing in cheap and abundantly available renewable energy.”

ENDS

[1] £2,300 and £68bn figures calculated as below. Price cap at 30 March 2021 was £1,042 for the average household. All figures based on Ofgem data. Average household energy bill levels include the relevant Energy Price Guarantee and Energy Bills Support Scheme payments where appropriate (the £52bn net cost of those measures are also borne by the taxpayer). Cap data is based on the prevailing typical domestic consumption values at the time – as set by Ofgem.

Cap change date Average household energy bill (GBP) Amount above GBP1,042 per household weighted for the number of months in price cap period (e.g. annual amount above cap halved for periods starting 1-Apr-21, but then quartered for periods from 1-Apr-23) All households
01-Oct-20 £    1,042 Baseline   
01-Apr-21 £    1,138 £                                48  
01-Oct-21 £    1,277 £                              118  
01-Apr-22 £    1,971 £                              465  
01-Oct-22 £    2,100 £                              529  
01-Apr-23 £    2,500 £                              365  
01-Jul-23 £    2,074 £                              258  
01-Oct-23 £    1,834 £                              198  
01-Jan-24 £    1,928 £                              222  
01-Apr-24 £    1,690 £                              162  
TOTAL   £                           2,363 £  68,527,000,000

[2] End Fuel Poverty Coalition records based on Ofgem price cap announcements and (in italics) Cornwall Insight predictions (last checked 16 Feb 2024)

Cap change date Increase (GBP) Average household energy bill (GBP) % increase from last period YOY change Change from Pre-Energy Bill Crisis Change from Pre-Ukraine Invasion
Pre-cap   1067        
01-Oct-17 -19 1048 -1.78      
01-Apr-18 41 1089 3.91      
01-Oct-18 47 1136 4.31 8.40%    
01-Apr-19 117 1254 10.39      
01-Oct-19 -75 1179 -5.98 3.79%    
01-Apr-20 -17 1162 -1.44%      
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 -240 1,834 -11.57% -12.67% 76.01% 43.62%
01-Jan-24 94 1,928 5.13% -8.19% 85.03% 50.98%
01-Apr-24 -238 1,690 -12.34% -32.40% 62.19% 32.34%
01-Jul-24 -193 1,497 -11.42% -27.82% 43.67% 17.23%
01-Oct-24 44 1,541 2.94% -15.98% 47.89% 20.67%

 

[3] YouGov Plc. Total sample size was 2,186 adults. Fieldwork was undertaken between 15th – 16th February 2024. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

 

Energy bills up in January as public blame Government for crisis

The public has placed the blame for people living in cold damp homes this winter at the door of the Government.  

In the Chancellor’s autumn statement on Wednesday, the Government refused to accept proposals from charities to provide an Emergency Energy Tariff for the most in need households and also ruled out a ‘help to repay’ scheme for the millions of people in energy debt. 

Polling conducted prior to the Autumn Statement for the Warm This Winter campaign found that well over a third of the public (37%) already attributed significant responsibility for the energy bills crisis to Government policy. 

Hardly any respondents (3%) said that Government policy bore no responsibility for people living in cold damp homes. [1]

Meanwhile, the Office of Budget Responsibility has concluded that the impact of the cost of living crisis and high energy bills means that living standards are forecast to be 3½ per cent lower in 2024-25 than pre-pandemic. Economists claim that this is the largest reduction in living standards since records began in the 1950s.

Fi Waters, spokesperson for the Warm This Winter campaign, commented:

“We’re devastated that the emergency energy tariff that would give hard-pressed families money off their monthly bills has not been adopted by the Chancellor in the Autumn Statement, but we’ve not given up. 

“The Government should be putting the vulnerable, disabled people, the elderly, those with medical conditions and the pregnant first rather than condemning them to living in cold damp homes.”

From 1 January 2024, Ofgem have confirmed that the average household’s energy bill will increase by 5% (or £94 a year) from current prices.

Compared to last year, the unit cost changes show decreases, but these are offset by daily standing charges that have increased by 5% for gas and 14% for electricity. Standing charges are now subject to a review by Ofgem.

When compared to pre-crisis levels, gas unit costs are more than double what they were and electricity costs are up 129%. Standing charges are up 8% for gas and 119% for electricity. [3]

A spokesperson from the End Fuel Poverty Coalition, commented:

“These price hikes come at the worst possible time for households. Bills will go up just as winter bites hard and household finances are hit further by Christmas credit cards, the long January pay period and the ongoing wider cost of living crisis.

“We warned* Ofgem that a January price cap rise was a bad idea when the regulator consulted on this in 2022. Now the chilling effect of the change is being realised, the inhumanity of this policy is clear to see.

“It will be anything but a happy new year for people trapped in Britain’s broken energy system.” 

Fi Waters from Warm This Winter continued:

“The price cap rising again in January is yet another kick in the teeth to ordinary people, particularly as in the last few weeks we’ve seen energy companies lining up to announce hundreds of millions of pounds worth of profits. They are raking it in and laughing all the way to the bank while ordinary people can’t afford to turn their heating on.

“It’s clear our energy system is broken. The relentless roll call of obscene profits and now a hike in energy bills in the new year, is not only hugely unfair, it’s costing lives, damaging health and wasting money as our reliance on fossil fuels is keeping bills sky high.”

Jonathan Bean from Fuel Poverty Action added:

“These inflated prices mean more cold damp homes and more deaths. Ofgem is protecting profits not people.”

ENDS

[1] Methodology note: Opinium conducted a nationally representative survey among 2,000 UK Adults from the 20th – 24th October 2023. Results were weighted to be nationally representative.

The public believe that energy firms have similar levels of responsibility as the Government –  showing similar levels of polling (38% felt firms had significant responsibility / 4% thought they had no responsibility). Just 15% said that external factors such as the war in Ukraine had a significant responsibility for the crisis (13% said these had no impact).

Q:UK24852_Q8. Summary – On a scale of 1 to 5 to what extent do you think the following groups are responsible  for the high numbers of people living in cold damp homes each winter? 1 indicates no responsibility at all and 5 indicates significant responsibility.  
  UK government policy Energy companies House builders Landlords External factors, such as the war in Ukraine
Base: All respondents (Unweighted) 2000 2000 2000 2000 2000
Base: All respondents (Weighted) 2000 2000 2000 2000 2000
1 – No responsibility 3% 4% 5% 4% 13%
70 72 108 76 262
2- 8% 7% 12% 8% 13%
150 135 231 163 270
3- 21% 21% 29% 22% 27%
427 421 582 445 535
4- 23% 22% 22% 23% 19%
452 447 443 469 388
5 – Significant responsibility 37% 38% 20% 33% 15%
732 760 404 661 305
Don’t know 8% 8% 12% 9% 12%
170 165 232 186 241


[*] Letter to Ofgem from End Fuel Poverty Coalition on January price rise proposal https://www.endfuelpoverty.org.uk/wp-content/uploads/220614-Ofgem-FINAL.pdf 

[3] Price Cap changes in unit costs and standing charges available at https://www.endfuelpoverty.org.uk/about-fuel-poverty/ofgem-price-cap/ 

 

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 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.

Surge in energy disconnections and debt

New figures from Ofgem have revealed that the number of customers disconnecting from the grid have surged – along with levels of energy debt.

The data shows that in quarter 1 2023, people disconnected from their energy supply more than 5 million times. Almost 1.2m customers were affected with over 800,000 bill-payers disconnecting for more than three hours.

Meanwhile, official energy debt levels have also surged.

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.

A spokesperson for the End Fuel Poverty Coalition commented:
“This is exactly what we have been fearing. As Bank of England figures show, people have burned through savings just to keep up with essentials and the cost of living crisis continues. Meanwhile average energy debt is surging to unprecedented levels

“It’s clear that households are just unable to cope.

“The majority of this debt is caused by the record high energy prices which have caused misery for millions, but generated excess profits for the firms involved in Britain’s broken energy system.

“Rather than end the Windfall Tax early, as the Government plans to do, it should instead look at how this could be used to help get those people suffering back on an even keel.

“Calls to introduce a Help to Repay debt matching scheme are backed by a range of charities. These plans would help reduce levels of fuel poverty as well as helping wider household finances.”

The figures come as the Ofgem Price Cap brings the average annual energy bill to customers down to around £2,074 from 1 July 2023. The Price Cap affects 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.