Reactions to devastating Ofgem price cap increase

With Ofgem announcing that the energy bill price cap is set to increase from 1 October, charities, trade unions, campaigners and politicians have been reacting to the news.

Described as “devastating” by the End Fuel Poverty Coalition and National Energy Action, the latest analysis of the Ofgem data shows the significance of the energy price increase:

Media and politicians across the political divide have been responding to the concerns of the End Fuel Poverty Coalition.

Classic FM said that the timing of the price hike “may seem cruel”, while the Guardian Editorial on Saturday wrote:

If ministers display the same tin ear that they did towards Marcus Rashford over children’s food poverty in this new crisis over fuel poverty, they will get what they deserve. They cannot say they have not been warned. The choice is theirs.

Meanwhile more Coalition members have also reacted to the news. Christine Nicholls from Community Action Northumberland commented:

It is now more important than ever we support people with switching to better tariffs, the timing of this increase will hit vulnerable families hard, families already struggling with the impact of the pandemic.

Tamara Sandoul, Policy and Campaigns Manager at the Chartered Institute of Environmental Health, said:

A price rise in energy bills this Autumn – right before the coldest months of the year – is likely to have devastating consequences. Living in a cold home can contribute to a range of serious health conditions, especially in vulnerable groups. We know that when people can’t afford to heat their home, they underheat it in order to make ends meet, resulting in ill health and additional costs and pressure on the NHS at the busiest time of the year.

Ofgem’s decision is expected to result in nearly half a million extra households living in fuel poverty. This would mean a serious step back for the Government’s targets of reducing fuel poverty. The move could also exacerbate the levels of homelessness. Many people living in the private rented sector have been struggling to meet the costs of their housing throughout the pandemic. Now that furlough and other Covid-related support is coming to an end, the cost of increased energy bills could push some tenants into arrears, debt and homelessness.

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Organisations condemn unprecedented Ofgem price hike

Ofgem has confirmed the worst price hike in energy costs in the history of the price cap.

According to End Fuel Poverty Coalition estimates, the £139 rise (equating to 12.2%) will result in an additional 488,000 households in fuel poverty.

Over 4m people are already estimated to be behind on their household bills and the price cap rise will take effect this autumn at the same time as the furlough scheme and the Universal Credit uplift end.

A spokesperson for the End Fuel Poverty Coalition said:
This unprecedented hike in energy bills comes at the worst possible time for millions of households across the country.
It is difficult to put into words just how devastating this news will be for people.
Especially hard hit will be vulnerable customers and those on pre-pay meters who are unable to switch suppliers and will be facing a winter in abject fuel poverty.
Switching advice and the price cap may provide some protection from the worst excesses of the energy market, but this will be no comfort to those now facing the stark choice between heating and eating.
The Government must take immediate action to provide emergency support for those who suffer due to the decision and speed up plans to improve the energy efficiency of the nations’ homes.

The Big Issue has recently warned of increasing levels of homelessness, caused in part by fuel poverty. Jacky Peacock from Advice for Renters, commented:

Recent research by the Joseph Rowntree Foundation found that 400,000 private renters already face eviction for Covid related rent arrears and up to a million are worried about being evicted in the next three months .  The hike in fuel costs could be the final nail in the tenancy coffin for these tenants, with homelessness escalating at a cost of billions to the public purse.

William Baker from Solutions to Tackle Energy Poverty (STEP) commented:

The massive rise in fuel bills caused by the price cap hike will affect most those hit hardest by the impacts of Covid and lockdown. It’s essential that the Government does not cut the £20 increase in Universal Credit this September and accelerates plans to improve home energy standards so that low income consumers waste less money on heating leaky homes.

Fuel poverty can make respiratory illnesses worse – meaning conditions such as Covid may be exacerbated by living in cold damp homes.

Ian Preston, head of household energy at the Centre for Sustainable Energy said:

The energy advice sector will face a tsunami of demand from people needing support once furlough ends, benefits reduce and bills go up. This price increase on energy bills is hitting at the worst possible time; just before winter, when millions of people are already struggling to pay their bills and people are spending more time at home than ever due to the pandemic.

Cold homes cause misery, ill-health and social exclusion. Many government and industry support programmes are due to end soon and people will struggle to survive. A warm home is a basic human right and it’s going to be a really tough winter unless we see action to maintain support for people in vulnerable circumstances.

Caroline Abrahams, Charity Director at Age UK, added:

The level at which energy prices are capped is of enormous importance to older people, because we know they are less likely to switch providers for a better deal – especially if they are not online, which is the case for about half of the 75+ population. For all those who are therefore effectively stuck on their existing tariffs, the best protection they have against unfair and unaffordable fuel bills is a robust energy price cap. Unfortunately, the fact that the cap is going up significantly this year will set them up for a miserable and anxious winter.
We know that many older people resist turning their heating up high enough to stay warm during cold spells, for fear of the cost. Sadly, today’s announcement is likely to mean even more older people find themselves in this horrible position and energy suppliers must identify and support those that will struggle in the cold months to come.

National Energy Action has developed a briefing setting out the support and solutions the government can implement. Peter Smith from NEA said:

This is a devastating increase. Millions of household budgets are already stretched to the limit and this massive increase could not be coming at a worse time. As well as a significant rise in general inflation – driving up spending on other essentials such as food – the new cap level takes effect in October when millions of people will see a reduction in their incomes, as furlough winds down and the uplifts to Universal Credit are likely to be withdrawn. This toxic combination of higher prices, reduced incomes and leaky, inefficient housing, will lead to a further surge in utility debt and badly damage physical and mental health this winter.

There is far more Ofgem and the UK Government can do to help to protect the most vulnerable consumers this winter. For years Ofgem and [the UK] Government have insisted the way to avoid increases to bills is to switch. Many fixed deals have however come to an end and for some customers switching is impossible due to levels of debt or because pre-pay customers have far fewer options to switch supplier or tariff. There may be limited scope to mute the impact of soaring wholesale prices within the cap, but Ofgem can and must provide deeper protection for the most vulnerable customers. The UK Government can also directly help reduce energy arrears as well as maintaining investment to reduce needless energy waste in our homes.

Ruth London, co-director of Fuel Poverty Action, concluded:

The massive increase in price-capped energy bills will be a body blow to millions, and advice to shop around for cheaper deals does not add up as a solution: If everyone affected switched, the deals would disappear, to cover suppliers’ costs and profits. Finding a better deal is laborious and suppliers rely on catching out those who are not only cash poor, but time poor. Placing the onus on victims to individually find an escape from the price hike is a false solution. Change needs to go beyond redistributing poverty.

We need a new pricing framework, where poorer people don’t pay higher rates than the rich. We need well-insulated housing, renewable energy, new heating systems, and wages and benefits that meet our costs. Fuel Poverty Action believes the government should investigate a totally new pricing system where everyone is guaranteed, free of cost, the basic energy we need for our homes and our health, while more cost falls on those who are heating mansions or joy-riding into space.

 

Energy bills set to hit highest peak since price cap introduced

Millions of people across Britain are set to be hit with the highest fuel bills since a price cap was introduced, according to a new analysis of data.

With wholesale prices increasing [1], Ofgem is set to announce an increase in fuel bills as early as 6 August. Around 15m people on default tariffs and pre-payment meters will be affected.

The move, estimated by Cornwall Insight analysts to see bills increase by £112 a year, will hit homes from 1 October [2]. Just as furlough comes to an end and the nation heads into winter. Such a rise would mean bills for homes on a standard variable tariff will be £226 higher than in February 2017. [3]

Calculations by the Coalition, provided to The Guardian, estimate that the price rise will force an additional 392,000 households into fuel poverty. [4]

  Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said:

Over 4m people are behind on their household bills and a second Ofgem price cap rise this year will be disastrous for the millions on the brink of fuel poverty.

Any price cap rise will only make matters worse for families struggling to make ends meet. At the same time, people are still reeling from the increases in bills caused by stay at home lockdown measures for the last 18 months.

While people’s attention is diverted by the rush out of lockdown, the reality is that the countdown to winter is on and it is a race against time. Any price rise – however small – will mean the choice between heating or eating becomes even starker later this year.

If that wasn’t bad enough, fuel poverty can make respiratory illnesses worse – meaning conditions such as Covid may be exacerbated by living in cold damp homes.

Short-term energy saving measures and shopping around for cheaper energy can help reduce bills, but the scale of the problem faced by people this year is huge and any increases during the pandemic and the recovery should be avoided.

We’d urge Ofgem and policy makers to think again about the price cap rise, or the Government to step in and provide emergency financial support to those who suffer due to the decision.”

Ruth London from Fuel Poverty Action, commented:

With thousands dying of cold every year the current energy pricing system – complete with price caps – is not fit for purpose.  As prices rise, a carbon tax rebate would help, but won’t solve this.

We need a new pricing framework, where poorer people don’t pay higher rates than the rich.

We need well-insulated housing, renewable energy, and wages and benefits that meet our costs. No special provisions or consumer protection will stop fuel poverty from killing pensioners and wrecking childhoods. The pandemic has taught millions that real change can’t wait.

Matt Copeland, Head of Policy and Public Affairs at National Energy Action said:

The price cap is an important measure to ensure that households are not exposed to excess profits in the energy market. However, if prices rise as is expected, Ofgem and Government must work together to help those worst affected by rising utility debt in order to avoid a devastating winter for people in and on the brink of fuel poverty. This must be combined with a long-term boost to spending to improve energy efficiency of buildings.

Without intervention, more people will remain cold at home during the winter, be more susceptible to respiratory illness, and unfortunately many will die. That is a truly unacceptable outcome, especially as the solutions to avoid it are well known.

Frazer Scott, CEO of Energy Action Scotland, commented:

More than a quarter of Scottish households are living in fuel poverty with many of these households living off the gas grid, dependent on electricity. The anticipated price rises will have a catastrophic effect on struggling households particularly as the job retention scheme ends and the Scottish winter approaches.

Scotland needs a fuel poverty strategy as a matter of urgency to ensure that we are prioritising the homes and families most in need. We must move quickly in order to protect our health service from the additional burden created by cold, damp homes and we must see adequate investment from Scottish Government that will eradicate the national shame that is fuel poverty.

Ben Saltmarsh, Chair of Fuel Poverty Coalition Cymru and Head of NEA Cymru, added:

Hundreds of thousands of households in Wales already struggle to keep warm at home. Far too many must ration essentials, cutting back on heating and electric. If these price rises come to bear, people will find it even harder still.

It is vital that the Welsh Government follows through with the promises that it made in its Fuel Poverty Plan to support the worst-affected first; upgrading the energy efficiency of fuel poor homes, maximising incomes, and working with partners, including the UK Government and Ofgem, to protect Welsh households.

[1] Wholesale prices on Zenergi show a rise of between 19% and 42% (from 2/6/21 to 30/6/21).

[2] Cornwall Insight data from energy analysts forecasts that the price cap on standard and default tariffs will rise in October to around £1,250/yr for a typical dual-fuel household paying by direct debit, up from the current price of £1,138/yr.

[3] End Fuel Poverty Coalition analysis of official Ofgem announcements.

[4] The calculation is based on EFRA Select Committee on Energy Efficiency and Fuel Poverty HC37 2009 and Fuel Poverty Methodology handbook BEIS / BRE, updated September 2016 which estimates that for every 1% rise in energy prices an additional 40,000 homes go into fuel poverty. The rise from 1138 to 1250 is a 9.8% rise so that equates to 392,000 (40,000 * 9.8).

Ofgem announces hike in fuel bills for millions

The End Fuel Poverty Coalition, a broad coalition of anti-poverty, environmental, health and housing campaigners, charities, local authorities, trade unions and consumer organisations, has criticised the decision to increase fuel bills for an estimated 11m people:

At the last count, 3.7 million households were already classified as living in fuel poverty and more than 2.1 million more were behind on their fuel bills.

Any price cap rise will only make matters worse for families struggling to make ends meet at the same time as bills are rocketing due to stay at home lockdown measures and the closure of schools.

While the price cap rises may seem small to officials, for ordinary people any increase will mean the choice between heating or eating becomes even starker.

If that wasn’t bad enough, fuel poverty can make respiratory illnesses worse – meaning conditions such as Covid may be exacerbated by living in cold damp homes.

Short-term energy saving measures and shopping around for cheaper energy can help reduce bills, but the scale of the problem faced by people this year is huge and any increases during the pandemic should be avoided.

We’d urge Ofgem and policy makers to think again about the price cap rise, or the Government to step in and provide emergency financial support to those who suffer due to the decision.

Support for households who are in fuel poverty is available from organisations such as Citizens Advice and can be found in our resources section.