National Energy Action

May 25, 2023

25, 2023 at 7:46 am Full story: Britain’s energy price cap falls to £2,074 but households will see little relief Jillian Ambrose Great Britain’s energy price cap has fallen to £2,074 a year, but the average household will still pay almost double the rate for their gas and electricity than before costs started to soar, our energy correspondent Jillian Ambrose reports. Around 27m households can expect a modest drop in energy bills this summer after the regulator Ofgem lowered the cap on the typical annual dual-fuel tariff to reflect a steep drop in global energy prices over recent months. From July, when the change takes effect, households will see their average gas and electricity bill fall from the £2,500 a year level set by the government’s energy price guarantee . But households who struggled to pay their bills over the winter will feel little relief, because government top-ups worth £400 between October to March have come to an end . The average energy bill will remain almost double the level seen in October 2021 – when Russia began restricting supplies of gas to Europe in a move that sent wholesale prices soaring. Before the energy crisis, the typical household paid £1,271 a year for gas and electricity . Households could still face dual-fuel bills above £2,074 if they use more than the typical amount of energy because Ofgem’s cap limits the rate energy suppliers can charge for each unit of gas and electricity – not the total bill. More here: Martin Lewis on the ‘Good Morning Britain’ TV show. Photograph: Ken McKay/ITV/Shutterstock He says: From 1 July, energy bills will no longer be subsidised by the state, as Ofgem is thankfully dropping the Price Cap below the Government’s Energy Price Guarantee for the first time since it was introduced. Bills will drop by an average 17%, meaning for every £100/mth people pay today, they will typically be paying £83/mth from July. “This will be a relief for many, yet most will still be paying more for their energy than during the winter. This is because, apart from for those with high use, the drop in the rates doesn’t make up for the £66 per month state support people got until April – and most are on monthly direct debit, which means they pay the same in summer as winter. Overall, this still leaves people paying double or more what they did before the energy crisis hit in October 2021. Lewis argues that the government could provide targeted support to help struggling families in the coming winter: “The fact the state is paying far less than planned to support people’s bills means there is some wriggle room here for targeted support for another hard winter coming for those who are just above the benefits threshold. Though I’m not holding out much hope that it’ll happen. “The moral hazard of high standing charges continues too. The reduction is all off the unit rate. It will still cost roughly £300/yr just for the facility of having gas and electricity. This perversely means the less you use, the less you save. I and many others have pushed Ofgem on this, to little avail, though it is launching a consultation on operating costs which impact this and may help a bit in the future.” Updated at 08.09 BST 6.6m households face fuel poverty under new price cap National Energy Action have calculated that there will still be 6.6 million households in fuel povert once the price of energy falls in July, under the new price cap, down from around 7.5m. The charity points out that energy bills are still approximately almost double the level of October 2021. And crucially, bills from July will be comparable to last winter as the Government has withdrawn support worth £400 to each household. National Energy Action’s chief executive Adam Scorer says: “Coming out of winter, most people will welcome any respite from record high prices, but it still leaves prices more than two-thirds higher than the start of the energy crisis and two million more households trapped in fuel poverty. More than two and half million low income and vulnerable households are no longer receiving any government support for unaffordable bills. For them, the energy crisis is far from over.” NEA also provide advice and support for those struggling – click here for more details. Full story: Britain’s energy price cap falls to £2,074 but households will see little relief Jillian Ambrose Great Britain’s energy price cap has fallen to £2,074 a year, but the average household will still pay almost double the rate for their gas and electricity than before costs started to soar, our energy correspondent Jillian Ambrose reports. Around 27m households can expect a modest drop in energy bills this summer after the regulator Ofgem lowered the cap on the typical annual dual-fuel tariff to reflect a steep drop in global energy prices over recent months. From July, when the change takes effect, households will see their average gas and electricity bill fall from the £2,500 a year level set by the government’s energy price guarantee . But households who struggled to pay their bills over the winter will feel little relief, because government top-ups worth £400 between October to March have come to an end . The average energy bill will remain almost double the level seen in October 2021 – when Russia began restricting supplies of gas to Europe in a move that sent wholesale prices soaring. Before the energy crisis, the typical household paid £1,271 a year for gas and electricity . Households could still face dual-fuel bills above £2,074 if they use more than the typical amount of energy because Ofgem’s cap limits the rate energy suppliers can charge for each unit of gas and electricity – not the total bill. More here: Ofgem’s Brearley: We have faced the biggest energy shock in our history. Q: Yesterday, energy firm SSE reported its profits have almost doubled in the last year ( to an adjusted pre-tax profit of £2.18bn ). Does that suggest the market might be rigged? Ofgem CEO Jonathan Brearley points out that SSE don’t have a domestic retail business in the UK, so they don’t have the business that we’re regulating through the price cap. He says there has been huge turbulence in the market with the cost of commodities internationally going up dramatically. That came as Russia started withdrawing their gas from the market, and the whole of Europe making plans to move away from Russian gas. That means the market is tighter and that does mean that prices are higher. Brearley adds that the situation is starting to stabilise, and repeats that he hopes to see “competitive fixed price deals reenter the market”. He concludes: We have faced the biggest energy shock in our history. But things are improving. Q: Wholesale gas prices have been falling for months – why is that benefit only being implemented from July? Brearley explains that energy companies are buying energy ‘forward in the market’.. So right now they’re not buying our power and energy for July. They’re buying it for later on in the year. That means this does take time to feed through. This chart shows how the month-ahead cost of UK gas has indeed plummeted – from over 600p per therm last August to 64p per therm today. A chart of the month-ahead UK wholesale gas price Photograph: Refinitiv Brearley adds that we are not in the same world as in 2015 or 2016, before the price cap was introduced. Then, people talked about prices “going up like a rock and then prices coming down like a feather”. Today, the formula Ofgem uses when prices go up is broadly the same as the formula for when prices come down. So the benefits of the current low prices should be felt for longer. Q: But millions of people are suffering – shouldn’t Ofgem be lowering the cap further? Brearley tells the BBC’s Today programme that Ofgem’s job is to ensure that costs are fairly reflected in the price paid by customers. That’s what its doing. Ofgem recently moved to a quarterly price cap change – rather than every six months. Brearley says that change means cost reductions are being passed through much more quickly than they otherwise would. He says there is “much bigger societal debate” about how to support families who are struggling with many househoold bills, not simply energy costs. Ofgem CEO Jonathan Brearley is now explaining today’s price cap announcement on Radio 4’s Today Programme. Q: National Energy Action think 6.5 million people will still live in fuel poverty under the new price cap – why is it so high? Brearley says there has been a dramatic fall in the cost of energy, leading to this morning’s reduction of around £420 per yer (for a typical annual bill). He says: The reason why is it still high is, ultimately, although that drop is dramatic, it is not as dramatic as the rises we saw between 2021 and 2022. Brearley adds that the energy market is stabilising, and Ofgem is seeing signs that customers could start moving to more competitive energy offers (which dried up when wholesale energy prices began surging, and many smaller suppliers collapsed]. He says: The market is stabilising and we are seeing signs that for example, switching may return, so we may see better offers even than the price cap. But ultimately, prices are higher than they were before. and you’re right, many families will struggle. Brearley adds that Ofgem, the industry and the government need to work together to support those vulnerable customers. Q: If one of your key jobs is to stand up for consumers, and 6.5m will be in fuel poverty, are you doing your job properly? Brearley says Ofgem’s job is to regulate the energy price, to regulate the market and to regulate the companies involved. But it can’t offer financial support to customers. He says that six or nine months ago, people though the price cap could be £3,000, £4,000 or evern £5,000 today. The market is moving a step in the right direction. but yes, there is still more to do. Ofgem’s Brearley: Bills will still be troubling for many people Ofgem CEO Jonathan Brearley has warned that energy prices are unlikely to fall to their pre-crisis levels [in 2019, the cap was £1,254 per year]. Brearley says: “After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction. People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs. “However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds. “In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis, and therefore we believe that it is imperative that government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups. In particular, we will continue to work with government to look at all options.” Updated at 07.13 BST This chart, from Ofgem , shows how typical energy bills will drop when the price cap is next adjusted in July: Ofgem’s price cap Photograph: Ofgem As you can see, Ofgem’s cap on energy bills will come down from £3,280 per year to £2,074 per year for a typical user. But, the government’s own energy price guarantee limits a typical bill at £2,500/year, so the effective reduction is smaller. Updated at 07.13 BST Today’s update means that, for the first time since the global gas crisis took hold more than 18 months ago, prices are falling for customers on default tariffs. Ofgem says: The savings can now be passed on to customers more quickly, thanks to Ofgem now updating the price cap quarterly rather than every six months. At its peak, the price cap reached £4,279 and, whilst today’s level is lower than last quarter, it is still above the levels it was before the energy crisis took hold, meaning many households could still struggle to pay bills. Ofgem cuts price cap to £2,074 from July Newsflash: Average energy bills will fall this summer. Regulator Ofgem has just announced that Great Britain’s energy price cap will fall from July, to £2,074 a year for a typical household – a saving of over £400 per year. The move means around 27m households can expect a modest drop in energy bills this summer. Ofgem is lowering the cap on the typical annual dual-fuel tariff to reflect a steep drop in global energy prices over recent months. From July, when the change takes effect, households will see their average gas and electricity bill fall from the £2,500 a year level set by the government’s energy price guarantee . But the average household will still pay almost double the rate for their gas and electricity than before costs started to soar. Full story: Millions will face fuel poverty despite Ofgem move to cut energy price cap Jillian Ambrose Around 6.5m households will still be in fuel poverty, analysts estimate, even once bills fall in July. At more than £2,000, typical energy bills will remain almost double the level they were at before Russia began restricting gas supplies to Europe as it prepared to invade Ukraine. In October 2021, the typical household paid £1,271 a year for gas and electricity, my colleague Jillian Ambrose explains. In a forecast that will alarm hard-pressed families, Cornwall’s analysts have warned they do not expect bills to return to pre-2020 levels “before the end of the decade at the earliest”. “It is good news energy prices are no longer spiralling but the energy crisis is far from over.” More here: Sharon Graham, the leader of the Unite union, has accused Ofgem of being the “regulator that won’t regulate”, saying it is “no longer fit for purpose”. Even before the new price cap announcement hits the wires at 7am, Graham says: “The price cap may be down but energy bills for millions of households will still be crippling. “In this moment of crisis we needed a powerful energy regulator which would be on the front foot fighting the profiteering of the UK’s energy companies. Instead we have a regulator that won’t regulate, rampant Big Energy plundering the economy and a government that’s permanently looking the other way. Unite has previously called for a clamp down on “excessive” profits generated by regional electricity distribution network operators, who bring electricity to UK homes Graham also cites the scandal of debt collectors breaking into homes to fit energy meters for vulnerable customers, saying: “The pre-payment meter scandal demonstrates for all those who haven’t realised that Ofgem is no longer fit for purpose. No wonder half the board have been sent on their way. It’s time to face facts. Time to bring the energy profiteers into public ownership. That would create a real Ofgem.” Introduction: Ofgem to announce energy price cap today Good morning. The energy regulator is poised to announces a cut to household bills this summer, but UK households could little relief in the ongoing cost of living crisis. Ofgem is expected to lower the energy price cap by several hundred pounds a year, when it is next adjusted in July. The announcement is due at 7am. Analysts at consultancy Cornwall Insight predicts the price cap will fall to £2,054 a year for a typical household, following the drop in wholesale energy prices in recent months. The cap, which was meant to protect consumers across Great Britain from rising prices, soared last year after the Ukraine invasion drove up oil and gas prices. This prompted the government to step in with its own energy price guarantee, effectively a lower cap than Ofgem’s. Since April, the Ofgem cap has been set at an annual level of £3,280 for the average household on a dual-fuel tariff, which would be painfully high. But the government’s energy guarantee means average bills are lower, at £2,500 a year for a typical customer. That EPG will rise to £3,000 from July – meaning the Ofgem cap (assuming it does fall today) will determine bills. Importantly, the cap is on the unit charge of energy – NOT the maximum a household can be billed (which is still determined by how much energy they use). And if the Ofgem cap does drop to around £2,000 per year, as expected, households will still be paying much more for energy than before the Ukraine war – even though European wholesale gas prices have hit 22-month lows in May . Households which struggled to pay their bills over the winter will continue to be squeezed as government payments worth a total of £400 between October to March this year have come to an end. Campaigners from the End Fuel Poverty Coalition have warned that households hoping for a sharp drop in their bills may find little difference compared with the rates they paid over winter. Simon Francis, a coordinator at the coalition, said last week: “People now face many more months with bills remaining stubbornly high. This will see them continue to use up their savings for everyday items, run up credit card bills, fall into debt with energy firms or turn to food banks as the cost of living crisis deepens.” Although inflation did fall yesterday, prices continue to rise faster than economists expected, driven by essentials such as food. The agenda 9.30am BST: Latest realtime UK economic data from the Office for National Statistics 11am BST: CBI distributive trades survey of UK retail sector 1.30pm BST: US weekly jobless claims figures 1.30pm BST: Chicago Fed national activity index Updated at 06.55 BST