Tag: Ofgem

Customers set for £1.3bn bill for energy debt charges

Households will be paying energy firms a combined £1.3bn in annual charges to help suppliers recover bad debt from 1 April.

A new report from the Warm This Winter campaign also casts doubt on the effectiveness of the charges in actually helping customers struggling with their bills. [1]

Energy firms were already able to charge £842m a year on bills for bad debt allowances, but from 1 April 2024 Ofgem has ruled that an additional £735m can be charged (or £28 per household per year). The amounts are offset by a £275m adjustment to the bad debt charges incurred after the Covid pandemic. 

The combined impact of these charges varies depending on the bill type with prepayment meter customers paying the least at £25.17 per household per year. Direct debit customers pay £38.96 a year on these charges while standard credit customers are hit hardest paying £129.71.

The report also reveals that “debt-related costs” consist of three main elements: bad debt write offs, debt related administrative costs and working capital. It appears unclear if these write offs will come off customers’ accounts, or if they are written off on supplier income statements while the debt is sold to debt collection agencies.

In addition, the debt related administrative costs and working capital include recouping the costs of the moratorium on involuntary prepayment meter installations. The moratorium was brought in after it was found energy firms were breaking into vulnerable people’s homes to force them onto a prepayment meter.

Firms can also claim for the administrative costs to suppliers from dealing with customers in debt, despite other allowances in the price cap enabling them to cover operating costs. The allowances also allow firms to claim for the day-to-day costs of customer arrears and using the money to cover the period between an energy firm incurring costs and receiving customer payments.

The news has been met with concern from consumers, with new polling from Opinium finding that over half (55%) of the public oppose energy firms using money raised through the additional £28 per household being spent on debt administrative costs. [2]

The public felt that around half (48%) of the money raised from the £28 debt charge should be spent writing off household energy debt of the customer accounts of those most in need.

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

“Energy bill payers are quite rightly up in arms about these additional costs which look like they do nothing to reduce the debt of ordinary people but instead help energy companies pursue those who simply can’t pay.

“It’s yet another outrageous rip off caused by our broken energy system, where ordinary people are expected to foot the bill all the time whilst energy giants bank billions and their bosses live in the lap of luxury.

“We need long term solutions such as expanding homegrown renewable energy and a mass programme of insulation to bring down energy bills for good so UK families no longer find themselves in debt through no fault of their own and are hounded for payments.”

A spokesperson for the End Fuel Poverty Coalition, said:

“The recovery of energy debt led to the forced prepayment meters scandal in 2023 and customers are still paying the price for energy firms’ poor practices.

“Rather than hit hard pressed households with higher standing charges, we need to see a longer-term approach to solving the energy debt mountain, such as an industry wide Help To Repay scheme.

“If Ofgem persists in implementing this charge, the very least they can do is ensure it is used to write off debts from customer accounts and isn’t spent on hiring debt collection agencies.”

Policy expert and report author Richard Winstone, added:

“Ofgem produced over 350 pages of documentation to reach a conclusion that will cost the public hundreds of millions of pounds extra this year with no clear benefit for consumers. They pack their documents with complicated jargon and formulae, yet they could not find room for a simple explanation as to how this money will actually benefit those struggling with their energy bills. 

“Throwing money at suppliers and hoping they do the right thing is what has led to record profit levels from the likes of British Gas at a time when customer service standards are at their lowest for a decade and customer debt is at its highest. Ofgem either needs to stop increasing the cost to consumers or start creating regulation that ensures suppliers use the additional funds for specific, consumer-benefitting, purposes.”

Jan Shortt, General Secretary of the National Pensioners Convention, commented:

“As always, it is the customer that pays, not the shareholders or energy industry who are currently making the biggest profits for years. Sustainable and affordable energy sources are a must and the regulator should consider how it can protect customers from this unacceptable level of levy when everyone is still struggling with high energy bills.”

ENDS

[1] “An overview of the additional debt related costs”, Richard Winstone / Warm This Winter, March 2024. Full report available to download. 

[2] Public opinion polling from Opinium who interviewed 2,000 people between 15 and 19 March 2024. Results were weighted to be representative of the UK population.

55% oppose using the money to cover admin costs, 25% support, 20% don’t know.

48% figure is based on respondents choosing a range of percentages to be used to write off debt. The figure includes the responses from 16% who felt none of the money should be used in this way, 16% felt all of the money raised should be used in this way. 

Ofgem allows energy firms to force fit prepayment meters

Ofgem has given the green light to energy firms to resume force-fitting prepayment meters in people’s homes.

The practice was suspended in early 2023 after investigations by the i and the Times newspapers.

EDF, Octopus and Scottish Power can now install the meters again after meeting new rules set by Ofgem, the industry regulator.

However, a spokesperson for the End Fuel Poverty Coalition, commented:

“It is outrageous that energy firms are seeking to use the courts to force people onto prepayment meters in the middle of winter. These meters have the potential to leave them without heating in the middle of winter.

“We still have grave concerns about the processes energy firms have in place for assessing vulnerabilities. Late last year, Scottish Power were found to be trying to seek warrants to force vulnerable households onto prepayment meters.

“Ultimately, without a change in the law, we knew this day would come. MPs and Ministers – who ignored pleas to introduce a full ban – can only hope that it is not their vulnerable constituents who are forced onto these meters.

“If anyone receives a court summons from their energy firm they must contact Citizens Advice, a local law centre or other advice provider as soon as possible to see if help is available to them. Customers should not ignore these letters as the consequences of doing nothing could be severe.”

Jonathan Bean from Fuel Poverty Action added:

“We are horrified that Ofgem has taken the cruel and dangerous decision to allow Scottish Power and others to break into homes and limit energy supplies in the middle of winter. This will leave many people traumatised and cold.”

National Pensioners Convention General Secretary, Jan Shortt said:

“While we understand that energy debt needs to be dealt with, force fitting Prepayment Meters through the courts is a draconian measure the NPC would very much like to see abandoned.  We will be monitoring very closely any efforts to apply warrants granted.

“There are many reasons for energy debt – not least the doubling of costs last year and the cost-of-living crisis making it very difficult for the majority of ordinary people and pensioners to eke out their income to pay ever-increasing bills.

“We urge the Minister for Energy Security and Net Zero to engage with the energy providers, the Regulator of Ofgem, the NPC and the End Fuel Poverty Coalition to debate and consider a plan to enable those in debt to be able to make payments according to their ability, not the energy providers to top-load plans.

“We would also welcome some understanding from energy providers in terms of customer responses to their communications on debt.  Firstly, they should understand that for most older people, there is no spare money, and they are not members of the ‘won’t pay’ brigade.  The overt assumption that everyone in debt is deliberately not paying is erroneous, spiteful and completely unnecessary.

“Secondly, the energy providers need to rebuild trust between themselves and their customers as a result of those choosing to work outside of their moral obligations.”

Before suppliers can restart involuntary installations, they must meet the conditions set out by Ofgem. These include:

  • Suppliers must conduct an internal audit to identify wrongfully installed involuntary PPMs installed before the PPM moratorium (in place from February 2023) and offer compensation and a return to a non-prepayment payment method to any affected customers.
  • The supplier must commission and conclude an independent assessment to verify their readiness to comply with the new rules.
  • The suppliers’ Board must attest that the supplier is ready to restart involuntary PPMs in compliance with the Code, and pay redress to customers of wrongly installed PPMs
  • If the PPM Market Compliance Review finds major concerns, the supplier in question will need to take corrective agreed with Ofgem

A statement by Ofgem added that once suppliers meet the above conditions and restart involuntary PPM installations, they must also provide regular monitoring data to the regulator, so that concerning practices can be identified early.

Customers and consumer groups will be able to check energy suppliers that can install prepayment meters without household permission on the Ofgem website.

While EDF, Octopus and Scottish Power can now proceed with considering involuntary PPM installations as a last resort, they will still be required to follow a robust set of rules put in place by Ofgem. These rules include:

  • Making at least 10 attempts to contact a customer before a prepayment meter is installed
  • Carrying out a site welfare visit before a prepayment meter is installed
  • Refrain from all involuntary installations for the highest risk customers (the ‘do not install’ category) including:
  • Households which require a continuous supply for health reasons, including dependence on powered medical equipment,
  • Households with an older occupant (aged 75+), without support in the house,
  • Households with children aged under 2 years old,
  • Households with residents with severe health issues including terminal illnesses or those with a medical dependency on a warm home (for example due to illness such as emphysema, chronic bronchitis, sickle cell disease).
  • Suppliers must also assess the suitability of a PPM when one of the below disabilities/characteristics/conditions is a factor:
  • Children 5 and under,
  • Other serious medical/Health Conditions (such as neurological diseases (Parkinson’s, Huntingdon’s, Cerebral Palsy), respiratory conditions (COPD) and mobility limiting conditions (Osteoporosis, Muscular Dystrophy, Multiple Sclerosis)),
  • Serious mental/developmental health conditions (such as clinical depression, Alzheimer’s, dementia, learning difficulties, Schizophrenia),
  • Temporary situations (such as pregnancy, bereavement)

Call for the abolition of the January price cap change

Campaigners have called on Ofgem to scrap future January energy bill changes as a five percent hike in prices hits households at the worst possible time.

The Warm This Winter campaign has called the increase a step too far for ordinary households in the UK, many of whom face the choice between eating and heating.

A spokesperson for the End Fuel Poverty Coalition commented:

“Struggling households are facing an assault from all sides. Energy bills are going up just as winter bites hard, Christmas debts have to be paid off and the ongoing wider cost of living crisis continues into another year.

“Ofgem needs to abolish this January price hike. The cruel impact of a change in bills at this time of year can’t be underestimated.

“We criticised the policy strongly when it was introduced as we feared this would be the result of it – bills going up at the worst time of year.

“Given the way the price cap is structured, it is unlikely we’ll ever see a decrease at this time of year. Changing the price cap three times a year would be enough to pass on any reductions in wholesale prices to consumers and ensure we would not have a change of bills in the middle of winter.”

Warm This Winter spokesperson Fiona Waters added:

“Without additional support, it will be anything but a happy new year for people trapped in Britain’s broken energy system.

“We need to see the UK Government introduce an Emergency Energy Tariff for vulnerable households and a Help To Repay scheme for those in energy debt.

“Failure to avert this cold homes crisis will lead to pressure on the NHS, a mental health catastrophe and additional winter deaths caused by living in cold damp homes.”

It follows Warm This Winter’s latest research which revealed 16% of adults (8.3m people) live in cold damp homes, exposed to the health complications that come from living in fuel poverty. Of those, vulnerable households and customers on prepayment meters are more likely to live in dangerous, cold damp homes.

The NHS warns that people with damp and mould in their homes are more likely to have respiratory problems, respiratory infections, allergies or asthma.

Unaffordable energy prices are here to stay and even in winter 2024/25, energy bills are expected to be 60% higher than winter 2020/21.

“People have had enough of these sky high energy bills and today’s price cap places yet another huge burden on families who are stretched to the limit, we need an end to this vicious cycle. The UK Government needs to take much more action to help people stay warm this winter and every winter through increased support for home insulation and cheaper renewable energy,” added Fiona Waters.

Advice workers and charities could benefit after new Ofgem rules

Energy suppliers must prioritise enquiries from vulnerable customers and their representatives, under new rules announced by Ofgem. 

A recent report [paragraph 36] by the House of Commons Select Committee on Energy Security, called for firms to set up a priority access line for charities working with households in fuel poverty. This would enable advice workers to access enhanced customer service and enable them to help more people in the long run.

Roni Marsh from South West London Law Centres gave evidence [Q42] to the Committee in September and told MPs:

“I would like to ask for us to have priority access to some of the energy firms, not so that we can spend less time with people but so that we can see more people with the time we have with a priority support route.”

Now under the new Ofgem rules [p8], energy firms have an obligation to “prioritise vulnerable customers who need immediate support, or their representatives acting on their behalf.”

Energy firms now have until the 14th December to put these measures in place.

A spokesperson for the End Fuel Poverty Coalition, whose members include front line community organisations, commented:

“Thousands of hours of advice time is wasted each year by charities waiting on hold to speak to energy firms about the problems faced by the people they support. We expect energy firms to make good on the promises they made to MPs on the Commons Energy Select Committee before this winter.”

The requirements also require suppliers to contact customers if they miss two monthly or one quarterly payment, check to see if they are struggling with bills and, if so, offer support such as affordable payment plans or, if appropriate, repayment holidays. 

Recent research by a price comparison website found that almost one in seven people say they have gone from being in credit to their energy firm a year ago to owing money now.

And as a first step, suppliers will also need to publish the ratings of their customer service. Ofgem will also begin work with the sector to develop new measures of customer service with a view to publishing next year.

Warm This Winter campaign spokesperson, Fi Waters said: 

“Suppliers need to get their act together and give customers the service they deserve. Our Tariff Watch Report revealed companies are charging £242 on average per customer on operating costs.

“Instead of spending the same amount on customer service as they do on marketing, which includes football sponsorship, they should plough that back into providing a proper and effective service for the ordinary people they are making millions from. 

“Whilst we welcome any move from Ofgem to make suppliers more accountable, what Warm This Winter is demanding is an end to our broken energy system and current government inaction that is costing lives, damaging health and wasting money.” 

Jonathan Bean of Fuel Poverty Action said:

“Ofgem’s proposals are a weak response to the awful treatment that many customers suffer.  Vulnerable people are forced to battle for months, causing enormous harm. 

“Rather than punishing them for their failures, Ofgem may even allow energy firms to increase their already bloated operating cost allowances.”

The End Fuel Poverty Coalition spokesperson added:

“It’s not enough for energy firms to just pick up the phone to customers struggling with their bills. With soaring energy debt levels, people need to have their concerns dealt with efficiently and in a sympathetic manner.

“We hope that as the new guidance is implemented, Ofgem will expand the measures it uses to assess energy firms’ performance. As well as ‘contact ease’ being measured and published, the regulator should also consider ‘contact success’ and ‘contact empathy’ as measures of performance for energy firms.”

The new standards – developed following a statutory consultation this summer – aim to make it easier for customers to contact their suppliers, ensure households who are struggling with bills are supported and improve overall customer satisfaction. The End Fuel Poverty Coalition’s response to the consultation can be read online [pdf].

The introduction of the new rules into supplier license conditions means Ofgem claims it will be easier for the regulator to take action where there is evidence of suppliers failing to meet these requirements. 

Consumers need help to repay energy debt, not higher bills

Proposals to increase energy bills further in response to surging levels of household energy debt have been criticised by campaigners.

While energy suppliers made more than £2bn in profits in the first half of 2023 alone, new figures from Ofgem found energy debt reached a record £2.6 billion due to soaring wholesale prices and cost-of-living pressures on households.

A one-off increase to customers’ energy bills of up to £17 a year is now being considered by Ofgem, which the regulator argues will protect firms from customers running up large debts.

But charities and campaigners have called for the introduction of a “Help To Repay” scheme instead of passing the cost of debt onto all households.

The coordinator of the End Fuel Poverty Coalition, commented:

“Households are struggling under the huge weight of energy debt – which has been caused through no fault of their own, but by record energy bills.

“All this time, energy firms have continued to profit from the misery of people racking up debt and living in cold damp homes.

“Rather than pass on more increases to energy bills, the Government needs to work with energy firms to introduce a ‘help to repay’ scheme to help get Britain’s households back onto an even keel.

“Given that the Government is due to hand Norwegian oil giant Equinor a massive tax break for the controversial Rosebank fossil fuel field, there’s an obvious source of money for this support plan.”

Adam Scorer, chief executive of National Energy Action, said: 

“This is the highest level of energy debt we have seen, it is growing quickly and concentrated in the poorest households.”

In June, a range of organisations including the End Fuel Poverty Coalition, Money Advice Trust, StepChange Debt Charity, Scope and National Energy Action wrote to the Secretary of State for Energy Security and Net Zero [pdf] with proposals to set up a ‘Help To Repay’ repayment-matching scheme.

David Cheadle, acting chief executive of the Money Advice Trust, the charity that runs National Debtline, told Press Association: 

“With energy debt at a record high, now is the worst possible time to increase bills further, as Ofgem is proposing.

“Instead, the Government must step in and act now to help households facing unaffordable debt repayments by introducing a Help to Repay scheme to offer payment matching and write-off.

“Doing so would help tackle the record levels of energy debt we are now seeing, without the need to increase energy bills for all customers.”

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

“The fact Ofgem is considering a £17 additional bill on all households is appalling. They say it’s to cover £2.6 billion of energy debt, but that enormous debt just proves ordinary people cannot keep footing the bill for our broken energy system. 

“The government needs to put the public’s need for an affordable energy supply ahead of the demands of energy giants. 

“Why not use the billions that its giving in tax breaks to Norwegian oil giant Equinor for the Rosebank oil field, which will do nothing to lower fuel costs, to write off this debt that people have through no fault of their own. ”

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.

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.”

Price cap warning as Ofgem set summer bills

Millions of domestic energy customers will see their energy bills stay at near record highs.

The latest Ofgem Price Cap announcement has set new prices for what consumers will pay for energy from 1 July 2023, with the average household seeing an energy bill of £2,074. If customers use more than the average consumption, they will still pay more than this figure as the cap limits the unit cost, not the total bill. 

Up until as recently as March, the average household energy bill stood at £2,100 due to the impact of Government support programmes. Last summer, average bills were £1,971 meaning energy will be 5.23% more expensive in summer 2023.

Predictions are that future price caps will set average energy bills at £1,976 from 1 October and rising back to £2,045 from 1 January 2024.

According to End Fuel Poverty Coalition records, this means that energy bills will be roughly: 

  • DOUBLE what they were in 2020.
  • 60% ABOVE what they were before the invasion of Ukraine.
  • At a similar level to last winter, but with people having less ability to pay as the crisis continues.

Anne Vivian-Smith, a disabled former community worker from Nottingham, said:

“Last winter I couldn’t keep myself warm as energy bills soared. To learn that I might have to face the same level of energy bills again is a frightening prospect. Other bills have gone up and the cost of living has soared – we’re less able to pay our bills now than we were last winter.”

Junnie Braithwaite is 56 and lives in northeast London. Her socially rented apartment is split over two floors, and she needs to use a stairlift because of fibromyalgia and arthritis. She said: 

“It’s give with the one hand and take with the other, I might get a few quid off my energy bill but that’s swallowed up by food prices going through the roof. I still don’t have peace of mind and I am already dreading next winter when my energy bills will go up again.”

A spokesperson for the End Fuel Poverty Coalition commented:

“The sting in the tail to this announcement is that customers are still going to be paying roughly the same for their energy as last winter. 

“And after months of inflation and the wider cost of living crisis, people are even less able to afford these high energy bills.

“The government needs to use the summer to fix Britain’s broken energy system, because for millions of people the energy bills crisis is far from over. This means ramping up energy efficiency programmes, helping the public with energy debt and reforming energy pricing arrangements so people don’t suffer again this winter.”

Research for the Warm This Winter campaign found that over 9 million adults lived in cold damp homes in winter 2022/23 and official figures showed cases of hypothermia surged by 36%. 

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

“Britain’s broken energy system is set to cause another winter of misery, with fuel poverty affecting many of the most vulnerable. But as people continue to struggle through the energy bills crisis, the energy producers will continue to reap record profits.”

Fixed term deals which may now come onto the market may not be the solution, with recent figures from Future Energy Associates show that these may boost energy firms’ profits and be more expensive to consumers than the standard variable tariff.

The Government has announced funding to help with the cost of living, but it will not help around 1.7 million households in fuel poverty and represents a real-terms cut in support compared to last year.

Other inequalities in the energy market will remain with customers paying by standard credit (i.e. paying by cash, cheque or bank transfer) hit with a significant price premium.

Meanwhile some regions, such as Merseyside and North Wales will pay substantially more than others, such as those in the East Midlands.

Bethan Sayed from Climate Cymru said:

“The regional inequalities are deeply unfair, with people in North Wales paying substantially more than other parts of the UK for their energy. This is compounded by people living in old, leaky homes or off grid, and those on prepayment meters getting less energy for their money. This needs to change.”

Jonathan Bean from Fuel Poverty Action added:

“As people sink deeper into debt, basics like washing your clothes are becoming unaffordable luxuries for many. We need long-term solutions to fix Britain’s unfair energy system, such as providing a free ‘energy for all’ allowance for those that need it.”

PPMs code of practice does not go far enough

Energy firms have signed up to a new code of conduct to govern the forced installation of prepayment meters.

The code has been described by Ofgem as a “new voluntary code of practice [which] is a minimum standard that clearly sets out steps all suppliers must take before moving to a PPM which will place a voluntary ban on forcibly installing prepayment meters in the homes of customers over 85 and will make representatives wear body cameras as part of a new code of conduct.”

However, a spokesperson for the End Fuel Poverty Coalition, commented:

“This code of practice simply does not go far enough and the fact it is voluntary undermines its objective.

“There are really vulnerable groups which have been omitted from its full protection and we have serious concerns about how it will be implemented, such as how people will prove their medical conditions without being humiliated by an energy firm health inspection.

“The plans also fail to deal with the elephant in the room – the growing household energy debt mountain. According to figures from the Warm This Winter campaign 29% of the population is in debt to their energy firm.

“This was the Government’s opportunity to take meaningful action and introduce targeted debt relief for those most in need. It has failed to do so and seems to have given in to energy industry demands to let them go back to the bad old days of forcing prepayment meters onto customers in distress.”

Rachael Williamson, head of policy and external affairs at Chartered Institute of Housing responded to the announcement, commenting:

“This new code of practice is an important step forward in ensuring that some of the most vulnerable residents cannot have a prepayment meter installed in their home against their will. CIH welcome the code and Ofgem’s parallel focus on tighter enforcement and oversight, but we would like to see it go further and forbid forced installations in the homes of all vulnerable residents, not just those defined in the code as high risk.

“This is especially important for renters, who are more likely to be financially vulnerable or living with a cold-related illness, and who have borne the brunt of the cost of living crisis. We now need to see these changes incorporated into suppliers’ license conditions as soon as possible.”

Caroline Abrahams, Charity Director at Age UK, said:

“It’s good to see some regulation coming in to begin to rein in the practice of forcibly installing pre-payment meters (PPMs), which has previously been something of a Wild West, but these new rules do not go far enough.

“We don’t think any older person should be subjected to this treatment, not only the over-85s and the over-75s who are deemed vulnerable in some way, partly as a matter of principle but also because of concerns about how effective the assessment of vulnerability will be. The risk is that some older people – and younger people too – who should definitely not be on a PPM end up on one.

“Today marks an important first step but ultimately the sooner the practice of forcibly installing PPMs ends the better. In the meantime PPMs should only ever be used as a last resort.”

The Centre for Sustainable Energy also agreed that the moves do not go far enough, writing in a blog post:

“CSE advisors are hearing from more and more people in absolutely desperate circumstances every day. Keeping healthily warm is a basic human right and it’s wrong that so many people are struggling with cold homes and seriously worried about money.

“We urgently need a long term plan to fix our broken energy system. We need targeted support for people on low incomes. We need a strategy to improve homes so they so they don’t leak heat.”