Ofgem Archives - Page 2 of 5 - End Fuel Poverty Coalition

Campaigners urge stronger action on energy standing charge tariff reform

Charities and consumer groups have warned that Ofgem’s proposals for standing charge reform could see many households end up worse off if they accept one of the proposed tariffs.

In a submission to the official consultation on the issue, the End Fuel Poverty Coalition describes how consumers would only need to use half of the “typical domestic consumption values” before their bills increase if on a “zero standing charge” tariff.

Given the risks posed by the proposals, campaigners stress that the consultation should proceed with extreme caution and only after thorough piloting and evaluation to assess potential negative impacts on consumer behaviour.

A spokesperson for the End Fuel Poverty Coalition explains the concerns:

“In essence, the proposals create only two groups who might see savings.

“Firstly, those who drastically self-ration or self-disconnect from energy, potentially putting their health and well-being at risk. There can be no ethical justification for forcing households to reduce energy use to dangerously low levels in order to maintain the benefits of a particular tariff.

“The second group who may benefit are those who can minimise usage through smart technology, but this risks creating further inequality in the energy market due to ongoing issues with smart meter rollout.”

Other concerns expressed by the Coalition argue that the proposals do not move costs away from energy bills and simply “rearrange the deckchairs”, that they present a flawed version of rising block tariff for consideration and do not contain wider proposals for reform previously put forward (pdf).

It is argued that the current consultation also fails to address the unfair burden of standing charges, particularly for prepayment meter customers, who often accrue standing charge debt when disconnected.

National Energy Action warns that under the next price cap, some gas prepay users could face nearly £60 in charges before they can reconnect their supply and that 67% of prepayment users expect to ration their energy, highlighting the financial hardship imposed by the existing system.

Unlike other consumers, prepayment customers often lack a direct relationship with suppliers, making it unlikely they will switch to proposed zero-standing charge tariffs.

Campaigners are calling for more targeted policy solutions, including shifting standing charge accrual to the back of prepayment meters to prevent debt accumulation. They argue this measure would be minimally disruptive for suppliers while significantly helping vulnerable households.

The spokesperson continued:

We know that some of these issues need to be addressed working with the Government and are not in Ofgem’s gift. We urge the regulator to think again and meet with Ministers to discuss how their decisions can positively alter the affordability of energy bills, avoid discriminatory pricing and deliver longer-term reforms that bring down the cost of energy.

ENDS

Full consultation response available: https://www.endfuelpoverty.org.uk/news/reports-and-correspondence/

Households face 6.4% energy bills hike, but Warm Home Discounts to be expanded

Ofgem has announced the energy price cap for April to June is now set to rise by 6.4% from current levels meaning an average annual bill of £1,849 for households paying by direct debit.

This means the average household is set to pay over £800 more per year for their energy compared to winter 2020/21 – a 77% increase.

The Ofgem price cap means that energy firms should not charge more than the set rate for unit rates and daily standing charges for those on standard variable tariffs.

The cost of every unit of gas used will surge by over 10%, meaning the cost of gas is now double what it was in winter 2020/21.

Every unit of electricity will go up almost 9%. Around 97% of the time the cost of electricity is also driven by the price of gas due to the country’s energy system.

Also included in the small print is a clause that will allow energy suppliers to increase the profits (EBIT) made on every customer’s bill by 4.1% compared to the current quarter. The wider energy industry has already made £483bn in profit over the course of the energy bills crisis.

Taking into account price changes and government support over time, the total extra cost that the average household has had to find for their energy will reach £3,039 by the end of June 2025. [1]

Ministers have announced that the Warm Home Discount scheme will be expanded from winter 2025/26 to help an additional three million households while debt relief programmes will be improved following a consultation by Ofgem.

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

“The soaring cost of gas is driving the current spike in energy bills and the only way out of the problem is to continue drives to improve our energy security and for the Chancellor to announce a £13.2bn, fully-funded, Warm Homes Plan in the Comprehensive Spending Review.

“But alongside the transition away from reliance on gas, it’s crucial to provide support for vulnerable households struggling with energy costs now.

“Ministers are right to be focused on improving the Warm Home Discount scheme and on energy debt, which continues at record levels because households have to find more even money to use the same amount of energy.

“The big question will be how do we pay for these improvements in support. Both Warm Home Discounts and debt relief are traditionally funded through our energy bills. Yet the energy industry makes billions of pounds in profit every year and it beggars belief that Ofgem is increasing the profit and headroom allowances for suppliers in the current climate.

“For now, the advice for households is to make the most of existing energy efficiency schemes and if customers do shop around for a lower energy bill, they must use their own energy usage on price comparison sites. Bills can vary greatly due to different rates for every unit of energy used and the daily standing charges so it pays to be aware of how these might affect the total bill.”

Caroline Simpson, Warm This Winter campaign manager, commented:

“Yet another price cap rise is devastating news but billpayers need to know it is caused because global gas prices are soaring due to factors outside of our control and profiteering energy giants such as Centrica and Norwegian-owned Equinor, the biggest supplier of gas to the UK, who make billions of pounds each year out of our misery.

“It is therefore crucial that the government presses on with plans to fix this broken system and boost our energy security by rapidly increasing our supply of homegrown clean energy to free us from expensive gas and bring down bills for everyone for good.

“This must come alongside reform of electricity markets, investment in energy efficiency in our homes and financial support with the cost of energy for the most vulnerable households.”

James Watson-O’Neill, Chief Executive of the national disability charity Sense, said:

“Yet another increase in the energy price cap – the third in a row – will dismay many disabled people.

“Disabled households are telling us they’re living in crisis. The need to power crucial equipment, such as feeding machines and hoists, means many disabled people have no choice but to use extra energy. Our research clearly shows that many disabled people with complex needs are already struggling to afford their energy bills, with more than two in five (42 per cent) telling us they can’t afford to keep their home warm enough.

“Disabled people are more likely to be in fuel poverty than non-disabled people, and we know it’s not just extra energy bills that can hit hard. There are also the extra costs associated with specialist diets, insurances, therapies and accessible transport that disabled people need to contend with. An increase in energy costs is the last thing disabled people need.

“There is no end in sight and disabled people cannot be left waiting any longer for targeted help with their energy bills. We need the government to urgently implement a social energy tariff, to help level the playing field for those who rely on energy-intensive equipment.”

ENDS

[1] Data for excess costs above winter 2020/21 baseline is available from our page on the Ofgem price cap.

Cap change date	Average household energy bill (GBP)	Amount above GBP1,042 per household (weighted for the number of months in price cap period)
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
01-Jul-24	£ 1,568	£ 132
01-Oct-24	£ 1,717	£ 169
01-Jan-25	£ 1,738	£ 174
TOTAL		£ 2,837
01-Apr-25	£ 1,849	£ 202
TOTAL		£ 3,039

Energy bills up as some pensioners face worst prices on record

The average household energy bill is to increase by £149 from 1 October after Ofgem said it was hiking its price cap by 10% from the current £1,568 for a typical household in England, Scotland and Wales to £1,717.

Meanwhile, analysis by the End Fuel Poverty Coalition has found that in real terms, the changes this winter mean that some older people will face the highest energy bills on record.

A spokesperson for the End Fuel Poverty Coalition, commented:

“With energy bills for the winter ahead now confirmed as being 65% above where they were before the crisis, the Government needs to come up with a plan to prevent even more households entering fuel poverty this winter.

“Ending energy debt, extending the Household Support Fund, expanding Warm Home Discounts and evolving standing charges would all help mitigate the impact of high bills and the axe to the Winter Fuel Payment.

“But as well as support this winter, the public need to see a clear timetable for when the very real benefits of cheaper renewable energy and the Warm Homes Plan will kick in.

“To add insult to injury, in the detail of today’s Ofgem announcement is the fact that the profit margins energy suppliers are allowed to make will increase by 11% [pdf, page 4].

“Add to this that every month we hear about more massive profits for firms in the wider energy industry. It’s time to tax these firms fairly – not just the fossil fuel producers – and use the money to keep people warm now and in the long term.”

Warm This Winter spokesperson Fiona Waters said:

“This price hike is yet another blow to the millions in fuel poverty who, like every other bill payer in the UK, are still forking out 65 percent more than they did for their energy than at the start of the crisis.

“Meanwhile energy companies have been profiteering, making more than £470 billion since 2020. That shows there is money in the system but that is going to energy bosses and their shareholders, when it needs to go to ordinary people.

“Today just highlights the Government’s policies on renewables and energy efficiency are needed to mend this broken system but we also need help now to get everyone of all ages through the winter ahead.”

Richard Kramer, Chief Executive of the national disability charity Sense, said:

“This increase in the energy price cap will be very alarming for many disabled households, who face unavoidable extra energy use for essential equipment such as powered chairs and feeding machines. This is a stark reminder that the cost-of-living crisis is far from over, and disabled households still need extra support.

“We would like the government to implement a social energy tariff, which would help level the playing field for disabled people who rely on energy-intensive equipment. Disabled people cannot be left waiting any longer for targeted help with their energy bills.”

More reaction to follow

Ministers urged to review nine nightmare energy rules

Ministers should send a clear signal that they are on the side of consumers by reviewing nine sets of rules, according to campaigners.

As households count down to the next Ofgem price cap announcement on Friday (23 August), an analysis of recommendations from previous Warm This Winter Tariff Watch Reports [pdf] has identified ways regulators could cut bills.

While six recommendations from a series of Warm This Winter Tariff Watch Reports published during 2023 and 2024 have been implemented by Ofgem, a further nine proposals have not been acted on.

Chief among them are recommendations to bring down standing charges, cap exit fees and improve governance of the energy industry. [1]

The standing charge reforms could see a reduction in these annual charges on households by £152.06 (46% from £334.08 a year to £183.02).

Delivering these changes would require changes to Ofgem regulations and Government funding as well as action taken to protect low income and high usage households, such as those who rely on energy for medical needs.

This could include the introduction of a social tariff, which is backed by well over half the population according to recent polling by Opinium, and could be paid for through contributions from energy industry profits (producers, networks and suppliers).

Meanwhile, the loose regulation on exit fees has left bill payers at risk of being stuck on expensive fixed rate energy tariffs or with poor customer service as the cost of leaving a fixed tariff early would leave the household out of pocket.

Exit fees on energy bills have increased by 345% in the last three years. Around three million UK households have opted for fixed energy tariffs and the latest Warm This Winter Tariff Watch report shows that the majority have exit fees of more than £100. A snapshot taken in April 2024 found that 76% of fixed tariffs have annual costs above the Ofgem price cap.

Other rules which have been highlighted in Tariff Watch reports include a lack of transparency in energy firm ownership which has seen British households boost the profits of Chinese and Qatari Government-backed funds as the cost of the gas network has surged 38%.

Questions were also raised about the profits being made by energy firms due to an underinvestment in electricity infrastructure and 14 obscure charges to households’ electric bills.

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

“These suggestions must be part of a road map to bring down energy bills, improve transparency in the industry and reset Britain’s broken energy system so it is on the side of consumers.

“While these changes to regulation won’t be enough to resolve all the problems we see, it would signal a welcome change in direction.

“We know the Government has the ambition to bring down bills in the long term, but it also needs to look at shorter term measures too.

“Ministers can earn the public’s trust by protecting vulnerable households, reducing energy debt, bringing in changes to energy meters, ramping up insulation programmes, reforming standing charges and ending energy industry profiteering.”

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

“The new government has inherited a nightmare set of rules that are clear hurdles to creating the fairer energy system that the public are crying out for.

“With energy bills forecast to increase again in October, this problem is only going to get worse if new ministers do not step in now. Now is the time to bring back fairness with urgent action to support struggling households through the next winter and a commitment to end profiteering by properly taxing the wider energy industry.”

Dylan Johnson, from Future Energy Associates which compiled the reports, added:

“More can and should be done by the energy regulators.

“Overall, Ofgem must become more proactive in identifying problems with our energy system and more efficient in enacting the necessary changes to protect the most vulnerable in our society.

“For now, Ofgem must implement immediately actionable solutions and not shy away from making the key long-term decisions that can achieve a fairer, greener energy system.”

ENDS

Recommendations Addressed by Ofgem / Government (edition of Tariff Watch):

Convergence of PPM and Direct Debit Prices (TW1): Ofgem implemented a levelling charge, balancing the standing charges between PPM and Direct Debit customers.
Review of Wholesale Energy Allowances (TW1): Ofgem conducted a thorough review and concluded no systematic differences in costs.
Reduction on EBIT Allowance (TW1): Ofgem revised the EBIT allowance to include both fixed and variable components.
Market Stabilisation Charge (MSC) Removal (TW1): The MSC expired on March 31, 2024.
Consumer Standards Consultation (TW2): Ofgem announced reforms to improve customer service, effective December 2023.
New Prepayment Meter Rules (TW2): Ofgem set conditions for PPM installations, effective November 8, 2023, although these did not go far enough in addressing the concerns of all campaigners.

Recommendations Not Addressed by Ofgem / Government:

Transparency in Cost Calculations (TW3a, TW3b): Ofgem has not improved the transparency or provided detailed breakdowns and machine-readable data formats for DNO and gas network costs.
Clearer Explanations for Shifting DUoS and TNUoS Costs (TW3a): Ofgem has initiated a review but has not provided clear explanations or justified the cost shifts.
Addressing Chronic Underspending by DNOs (TW3a): It remains unclear what specific actions Ofgem is taking to ensure adequate investment by DNOs.
Dynamic Approach to Line Losses Calculation (TW3a): Ofgem has not implemented a dynamic framework for line losses.
Management of Gas Network Decommissioning Costs (TW3b): Ofgem has acknowledged the issue but has not detailed specific steps to manage decommissioning costs.
Ownership and Ethical Considerations (TW3b): Ofgem has not outlined specific actions to scrutinise and align gas network ownership with national security and ethical standards.
Cap on Exit Fees (TW4): Ofgem has not implemented measures to cap exit fees or improve their transparency.
Shift Costs from Standing Charges to Unit Rates (Standing Charge Report): Ofgem has closed their call for input on standing charges, but no further steps have been taken to move adjustment allowances, headroom allowances, profit allowances, payment uplift, and levelling costs entirely to the unit rate section of the bill.
Shift Policy Costs from Standing Charges to General Taxation (Standing Charge Report): While the Labour Party has indicated a willingness to broadly address standing charges in their manifesto, no concrete steps have been taken yet to move policy costs from standing charges to general taxation.

The full report is available to download. Previous Tariff Watch reports can be downloaded from the reports and correspondence section of the EFPC website.

Energy debt soars 57% in 12 months

Households’ combined energy debt has soared again in figures released by Ofgem.

The total energy debt (which is 91 days or more overdue) had risen to £3.3bn by end Q1 2024.

The figure is up from £3.1bn at end Q4 2023 and up 57% (from £2.2bn) at the same point in 2023.

The End Fuel Poverty Coalition previously revealed that one in five (18%) of households in energy debt are turning to illegal money lenders to pay for their bills and everyday essentials.

For many in energy debt, energy firms will suggest moving to a prepayment meter (PPM), which enables customers to pay off their debt every time they top up their meter.

But Warm This Winter research indicates that the suffering of households in debt on prepayment meters is even worse than for those on direct debit. The numbers turning to illegal money lending are also significantly higher for PPM customers (36% PPM / 13% DD).

A spokesperson for the End Fuel Poverty Coalition commented:

“Millions of households have fallen into energy debt due to the record high prices.

“The next Government must now make tackling energy debt a priority. It should do this by introducing a universal, consistent, nationwide, debt matching programme. This could be funded in part by the £1.3bn customers are paying through bills for energy debt costs this year.

“The average household has had to find £2,500 in the last few years just to keep their energy usage where it was. When combined with the ongoing cost of living crisis, this is a figure well beyond people’s means and it is no wonder that people are now getting deeper into debt.

“While the energy industry has pocketed the profits, struggling families have been abandoned with many turning to illegal money lenders.”

Experts have also recommended a ban on energy firms from selling on debt to debt collectors, better regulation of energy debt with energy debt and debt collection agencies used by energy firms to be subject to Financial Conduct Authority rules and more training for energy firms’ staff in recognising illegal money lending.

Steve Vaid, chief executive of the Money Advice Trust, the charity that runs National Debtline said:

“The fall in the Price Cap will alleviate some of the pressure many households are under, but many more will continue to struggle as energy bills remain high.

“As millions of people worry about keeping up with their energy payments, arrears levels have continued to increase and many have been left with unaffordable debts as a result.

“What we need to see from the next Government is urgent action through a Help to Repay scheme to help people trapped in energy debt access a safe route out.

“Anyone struggling with their energy bills, or worried about their finances, should contact National Debtline as soon as possible – our advisers are here to help.”

£1,071.98: The energy price cap households could have had

Energy bills are set to fall by 7% on 1 July as the new Ofgem price cap comes into force, but campaigners have claimed the figure could be £500 lower if measures had been taken to mend Britain’s broken energy system.

Insulating homes, reducing standing charges and removing VAT from energy bills would have significantly reduced household’s costs, according to analysis by the End Fuel Poverty Coalition. [1]

With the Ofgem price cap expected to rise again by around 10% in October 2024, the next Government has been urged to implement proposals to bring down the cost of energy from day one.

Chief among the asks for new ministers are to launch a comprehensive plan to bring down standing charges, provide more support for vulnerable households this winter and create more energy efficient homes (by strengthening minimum energy efficiency standards in the private rental sector and laying the statutory instruments needed for the Future Homes Standard and the Clean Heat Market Mechanism).

A majority (57%) of the public also back a social tariff, designed to offer cheaper energy to vulnerable households.

A social tariff is a discounted energy bill for people in greatest need, such as those people that have low incomes and are elderly, have young children or rely on energy for medical needs. It could be paid for by the £427bn in profits that have been generated by the whole energy industry since the start of the energy bills crisis. [2]

Campaigners have also called for the next Government to introduce a universal, consistent, nationwide, energy debt matching programme funded by the £1.3bn customers are paying through bills for energy debt costs this year.

A spokesperson for the End Fuel Poverty Coalition commented:

“Throughout the energy bills crisis we have seen sluggish progress on insulating and ventilating our homes, bringing down standing charges, moving to cheaper energy sources and bringing in comprehensive support for vulnerable households with their energy bills.

“Had we seen more concerted action on all these fronts, then the Ofgem price cap coming into force on 1 July would be £1,071.98 – £496.62 lower than what the average household is going to be paying.

“Given energy bills will stay high for the foreseeable future we now need the next Government to act quickly after the election to end energy debt, protect households from the volatile global energy market, bring down bills for good, improve housing standards and make Britain a clean energy nation.”

Warm This Winter spokesperson Fiona Waters said:

“Energy bills will go up again in October and years of staggering prices have taken their toll. Customers are already £2,500 out of pocket because of Britain’s broken energy system and now we know they are going to continue to be penalised if we don’t see the reforms we need.

“As well as the plans to insulate homes, bring down standing charges and provide support through a social tariff, we also need to see new renewables schemes that, according to the House of Commons Library briefings, are able to generate electricity more cheaply than fossil fuels.”

Juliet Phillips, UK energy lead at E3G added:

“It’s been repeatedly shown that investing in long-term, clean solutions to fix our broken energy system will bring bills down permanently.

“The British public backs common-sense proposals to upgrade our homes and ensure that everyone can afford to heat their home. We urge all political leaders to make this a national priority, and take action before energy bills are set to soar again this winter.

“Without action, households are set for another £200 price rise in the Autumn, as the UK remains dependent on expensive foreign gas.”

ENDS

[1] The cost was calculated by taking the following steps:

Take published Ofgem unit rates and standing charges for the average household based on current typical domestic consumption values (average use) of £1,568
Reduce gas consumption levels to reflect impact of improving insulation in home, in line with the ECIU model (brings average bill to £1,348.80)
Reduce unit costs to reflect the lowest available unit cost available on the market (Future Energy Associates database, brings the average bill to £1,292.28)
Reduce standing charges and adjust unit costs in line with Future Energy Associates discussion paper, published on 20 June 2024 (brings bill down to £1,124.95)
Remove VAT at 5% (£1,071.98)

Figures and methodology peer reviewed by Chris Galpin at E3G.

[2] Data as at 6 June 2024. Researchers examined the declared profits of the 20 firms the End Fuel Poverty Coalition is most asked to comment on. This sample of the industry ranges from energy producers (such as Equinor and Shell) through to the firms that control our energy grid (such as National Grid, UK Power Networks and Cadent) as well as suppliers (such as British Gas). It does not include supply chains nor market trading firms.

Energy giants have pocketed just under £427 billion in profits since the energy crisis started according to a new analysis of company reports. Over £34 billion of these profits (the equivalent of over £1,153 per household) are thought to be made by the firms and business units responsible for electricity and gas transmission and distribution. These are the “network costs” consumers pay for maintaining the pipes and wires of the energy system and are usually paid for through standing charges on energy bills. Standing charges have risen 147% in recent years for electricity and 15% for gas.

The last update was on 1 April 2024 which showed industry profits of £420bn with £30bn from networks and transmission.

The data was compiled by freelance business journalist David Craik. David’s experience has included writing business and city news and features for national newspapers and magazines such as The Daily Mirror, Sunday Times, Wall Street Journal, Scotsman and Daily Express. Much of his content focuses on company financial results and reports in the energy sector and on personal finance issues including wealth management, property, investing and managing household budgets and bills. If any firm wishes to correct the records, please email info@endfuelpoverty.org.uk.

Ofgem called on to keep the ban on energy acquisition tariffs

A coalition of consumer organisations and energy firms is urging Ofgem not to lift the ban on acquisition-only energy tariffs, which could lead to existing customers being excluded from the best deals and risk opening the door to loyalty penalties.

Ofgem has said it is minded to remove the ban on acquisition-only tariffs – which would be used by energy suppliers to attract new customers or lure switchers from rival firms – from 1 October 2024. It has consulted on this and is due to reach a final decision imminently.

Existing customers would not have access to these deals and Which? is concerned consumers who want to stay with their current supplier could be left worse off. These customers – and new ones whose initial deal expires – face being hit by so-called “loyalty penalties” as their bills jump in subsequent years.

New Which? research shows the public are opposed to cheap deals that exclude existing customers.

The consumer champion has written to the regulator alongside Eon, Octopus, So Energy, Rebel Energy, End Fuel Poverty Coalition, Citizens Advice and Fair by Design, calling for it to reconsider its proposals to lift the ban on acquisition-only tariffs.

In the letter, the organisations warn of the risk of “a return to a market which discriminates against loyal customers”. They also raise the potential impact on customers in debt, who may not be able to switch but could also find themselves struggling to access a better deal with their current supplier under the plans.

The letter highlights the lessons of recent history, when more than 30 suppliers went bust – many after trying to win customers with unsustainably cheap tariffs.

Which?’s latest survey findings show eight in 10 (81%) people would think it was unfair if their supplier was offering cheaper deals to new customers only. A similar number (78%) said they would think this was unfair even if they would potentially benefit in the short term by signing up to a discounted deal.

Rocio Concha, Which? Director of Policy and Advocacy, said:

“Our research has shown that consumers overwhelmingly believe cheaper energy deals only available to new customers are unfair – even when they might stand to benefit.

“That’s why Which? and a coalition of energy firms and consumer organisations have written to Ofgem warning them not to lift the ban on acquisition-only pricing.

“Allowing deals exclusively for new energy customers could open the door to loyalty penalties and would come at the expense of those who wish to stick with their current supplier on their best deal.”

A spokesperson for the End Fuel Poverty Coalition, commented:

“Removing the ban on acquisition tariffs will create price discrimination against loyal customers and also hurt further the millions of households who can’t switch to a new supplier because they are in energy debt.

“Removing the safeguard also means risking a return to the unsustainable form of competition in the energy market that existed before 2021. Suppliers collapsed partly because they had grown too quickly in a market driven by acquisition tariffs.

“Ultimately energy bill payers bore the heavy price of these collapsed firms through the Supplier of Last Resort programme which added billions to households’ standing charges.”

ENDS

The joint letter is available on the Which? website at this link.

Changes could halve energy standing charges

A new discussion paper that would see energy standing charges reduced has been published by campaigners.

Future Energy Associates have identified how standing charges for every household with electricity and gas connections could plummet from £334.08 a year to £183.02 – a reduction of almost half (£152.06 / 46%).

For electricity the standing charge would reduce from £219.42 to £149.17 per year (32% reduction) and for gas the standing charge would reduce from £114.66 to £33.85 per year (71% drop).

The analysts identified that up to £5bn a year of costs on energy bills could be moved to general taxation. Policy makers could remove these costs from all bills, which would bring down electricity unit rates as well or (for a lower cost to the Treasury of around £200m a year) remove the costs just from vulnerable low income households with high energy needs.

The options paper commissioned by the Warm This Winter campaign includes moves to:

Transfer five elements of standing charges (the adjustment allowance, headroom allowance, profit allowance, payment uplift and levelling costs) entirely to the unit rates.
Shift some policy costs to general taxation.
Revise the ratio of operating costs paid through standing charges versus unit rates to increase the amount on unit costs, thereby delivering an incentive to the energy market to drive down excess costs such as marketing.
Reduce the standing charge elements of network costs by 10%, funded by excess shareholder profits.
If all these options were taken together (i.e. changes to standing charges and unit costs) these proposals would reduce the total energy bill for the average household by £214.22 a year.

Dylan Johnson, one of the analysts involved in the report, said:

“The comprehensive changes we have suggested would bring down standing charges and could also mitigate negative distributional impacts of standing charge reform previously identified by Ofgem. We would urge new ministers to meet with industry, consumer groups and experts to analyse how we can change standing charges in a way that is fair to all households.”

A spokesperson for the End Fuel Poverty Coalition, commented:

“Standing charges are an unfair flat tax on every energy consumer. Every household pays through the nose just to be connected to the grid, even if they use no energy.

“In the past there has been caution about reform due to the potential impact of change on households with a high dependency on energy for medical needs, we still need further detailed analysis of these options by Ofgem to ensure that this group is not penalised.

“However, this report does indicate that reform of standing charges may actually be possible in a fair way. It will need Ofgem, the next Government, energy industry and consumer groups to work together to make it happen. The prize of cutting standing charges in half before this winter should be one which new Ministers seize upon.”

Jonathan Bean from Fuel Poverty Action added:

“Millions of us are suffering energy starvation due to high standing charges that leave no money for heating, hot water or power. Many on prepayment meters get cut off. This cruel energy system needs urgent reform by the new Government.”

Warm This Winter spokesperson Fiona Waters said:

“The energy crisis has already left bill payers £2,500 out of pocket since it started three years ago and we know energy bills will go up again in October.

“People up and down the country are literally at breaking point, are still paying 50 percent more for energy and at the heart of these unfair bills are the standing charges. The public are crying out for action now.

“The next UK Government will need to act quickly, bring down bills for good, end energy debt, improve housing standards through insulation and ventilation and also make Britain a clean energy superpower so we are not at the mercy of profiteering global oil and gas giants.”

For customers in energy debt, campaigners have also called for a universal, consistent, nationwide, debt matching programme funded by the £1.3bn customers are paying through bills for energy debt costs this year.

ENDS

Standing Charge Reduction Analysis by Future Energy Associates is available to download: https://www.endfuelpoverty.org.uk/wp-content/uploads/Standing_Charges_Final.pdf

Customers out of pocket due to Britain’s broken energy system

The average household has spent £2,500 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 £72bn.

The new figures calculated by the End Fuel Poverty Coalition come as Ofgem has lowered the price cap for domestic energy bills by 7%. However, the new cap level means that gas and electricity costs remain 50% higher than in 2021 and are predicted to increase again from 1 October according to expert forecasters. [2]

Recent research by Ipsos found that a third of people expect their disposable income to fall even further over the next year, while the Stop The Squeeze campaign has claimed that fewer than one in ten of the public feel that the cost of living crisis is over.

Meanwhile, the head of the energy regulator told MPs on the Energy Security and Net Zero Committee that prices “are still significantly higher than they were before, and when we look further out our best estimate is that prices are going to stay high and volatile over time.”

A spokesperson for the End Fuel Poverty Coalition, commented:

“Years of staggering energy bills have taken their toll and we now know the true cost of the crisis. Customers are £2,500 out of pocket because of Britain’s broken energy system, people are turning to loan sharks to pay their energy bills, millions of people are living in cold damp homes and many are experiencing a mental health crisis driven by high bills.

“The next Government will need to act quickly after the election to end energy debt, protect households from the energy market, bring down bills for good, improve housing standards and make Britain a clean energy superpower.”

Warm This Winter campaign spokesperson Fiona Waters commented:

“Even with today’s price cap reduction, people will still be paying 50 percent more than they were three years ago for gas and electricity.

“They are simply fed up with being ripped off and used as cash machines by the energy industry that week after week announces billions in profits. People want to see investment in a fairer system, especially during these times of global uncertainty when there could easily be another worldwide energy price shock.

“That’s why thousands have joined our Big Energy Credit Claim Back protest and political parties should listen. Voters want to see our broken energy system mended with a shift to homegrown renewable energy and a proper insulation scheme which will both reduce bills and increase energy security by freeing us from volatile global gas prices.”

ENDS

[1] £2,500 and £72bn 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
01-Jul-24	£ 1,568	£ 132
TOTAL		£ 2,495	£ 72,340,500,000

[2] End Fuel Poverty Coalition records based on Ofgem price cap announcements and (in italics) Cornwall Insight predictions (last checked 20 May 2024)

Cap change date	Cap change (GBP)	Average household energy bill (GBP)	% change 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	-122	1,568	-7.22%	-24.40%	59.48%	22.79%
01-Oct-24	71.83	1,631	4.61%	-11.04%	56.57%	27.76%
01-Jan-25	2.76	1,634	0.17%	-15.24%	56.83%	27.97%

Italics = Based on Cornwall Insight predictions

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.