The energy price cap has increased to £1,928 raising the average bill by £94
Union body says UK is “feeding foreign firms’ profits” while British households struggle
Commenting on Monday’s energy price cap announcement, TUC General Secretary Paul Nowak said: “No one should struggle to get by in one of the richest countries in the world.
“But 13 years of wage stagnation and cuts to social security have left millions badly exposed to sky-high bills this winter.
“Energy bills are already 50% higher than two years ago, so today’s rise will just hammer households even harder in the coming year. “
“It doesn’t have to be this way.
“Other governments are investing in publicly owned clean power and insulating homes.”
“The UK is feeding foreign firms’ profits and subsidising cheaper bills abroad, while British households struggle to heat their homes and pay their bills.”
Prepayment meter households will no longer pay more on average for their energy than direct debit customers, as the UK Government scraps unfair charge
Unfair charge on prepayment meter customers scrapped
change will help around three million households and save on average £21 a year
together with the new energy price cap taking effect today, households will save hundreds of pounds on their bills
Fairness will be delivered for households today as the government scraps the unfair charge on prepayment meter customers.
The change, taking effect from today, will help around three million households using prepayment meters across Great Britain – bringing their bills in line with those who pay by direct debit, with the government stepping in to cover the difference.
Currently, households on the pay-as-you-go meters pay more on average than direct debit customers, as it costs suppliers more to service their homes – such as collecting payments or giving out vouchers – with the charges passed onto consumers.
Removing the prepayment meter premium means these households will save around £21 a year on their bills, making sure the system is fair and providing extra support to consumers who are typically on low incomes.
Scrapping the prepayment meter premium comes as Ofgem’s latest price cap takes effect today – which thanks to improvements in the wholesale market, will bring the typical annual energy bill down from £2,500 under the Energy Price Guarantee to around £2,074. This will help lower inflation – one of the Prime Minister’s five promises – as high energy prices drive up prices across the economy.
The fall in energy bills will save the average household around £426, or 17%, and means for every £100 previously spent on energy bills, consumers will now pay £83.
Energy Consumers and Affordability Minister Amanda Solloway said: “No one should be charged more for having a prepayment meter – today, we’re putting an end to this historic injustice.
“With households on prepayment meters typically on some of the lowest incomes, this is a vital change.
“Alongside the hundreds of pounds coming off energy bills from today, thanks to the fall in the price cap – this will offer extra help to ensure families stop being unfairly penalised.”
To ensure the prepayment premium comes to an end as quickly as possible, the Government will be funding the change up to April 2024. Ofgem as the energy regulator will be devising a plan that will eradicate it permanently after that date.
Earlier this year the government took steps to crack down on the abuse of prepayment meters by energy suppliers. The Energy Security Secretary Grant Shapps demanded action from Ofgem and suppliers to put an end to wrongful prepayment meter installations in vulnerable households.
The government is clear moving customers to prepayment meters must always be the very last resort and has asked for regular updates from Ofgem and consumer groups to make sure all suppliers adhere to the regulator’s new Code of Practice – which puts measures in place to protect against them being installed in homes where they shouldn’t be.
Recent figures showed nearly £40 billion was spent by government between October 2022 and March 2023 to help keep household and business energy bills down, the most ever provided to subsidise household bills in UK history.
Over winter, the government covered nearly half a typical household’s energy bill and saved the average home roughly £1,500 by the end of June. That included providing £650 million to households on traditional prepayment meters through the Energy Bills Support Scheme.
The scheme saw vouchers totalling £400 issued over six months from October with latest figures showing 85% had been redeemed by the end of May.
While the deadline for applications has passed, that number is expected to rise with the last applications and reflected in figures due over the Summer.
Energy regulator Ofgem has announced its quarterly update to the energy price cap for the period 1 April – 30 June 2023.
From 1 April the energy price cap will be set at an annual level of £3,280 for a dual fuel household paying by direct debit based on typical consumption, a reduction of almost £1,000 from the current level, of £4,279 which reflects recent falls in wholesale energy prices.
The £3,280 figure indicates how much consumers on their energy suppliers’ basic tariff would pay if the government’s Energy Price Guarantee (EPG) were not in place.
From 1 April, the government has set the EPG at £3,000 for the typical bill – meaning that consumers will not pay the full level of the energy price cap.
This reduction in the price cap level reflects a significant reduction in the cost of buying and providing energy for customers. If it continues, it will mean that by the summer, prices paid by consumers will drop for the first time since the global gas crisis took hold more than 18 months ago.
The energy price cap was introduced by the government and has been in place since January 2019, and Ofgem is required to regularly review the level at which it is set. It ensures that an energy supplier can recoup its efficient costs while making sure customers do not pay a higher amount for their energy than they should. The price cap, as set out in law, does this by setting a maximum that suppliers can charge per unit of energy.
Ofgem CEO Jonathan Brearley said: “Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee. This means, that on current policy, bills will rise again in April. I know that, for many households this news will be deeply concerning.
“However, today’s announcement reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, and while it won’t make an immediate difference to consumers, it’s a sign that some of the immense pressure we’ve seen in the energy markets over the last 18 months may be starting to ease. If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.
“However, prices are unlikely to fall back to the level we saw before the energy crisis. Even with the extensive package of government support that is currently in place, this is a very tough time for many households across Britain.
“Where people are struggling, we urge them to contact their supplier to make sure they are getting all the help and support they are entitled to. We also think that, with bills continuing to be so high, there is a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.
Ofgem has robust rules in place to help people in vulnerable situations, and suppliers are obliged to offer payment plans and direct customers to available support.
Bill-payers will continue to receive additional support via the EPG until the end of March 2024, as confirmed by the Chancellor on Thursday 17 November 2022. The level of this support is set by Government.
There is no immediate action for consumers to take as a result of today’s announcement.
Ofgem continues to protect consumers through its ongoing robust regulation of the market, taking enforcement action where necessary and providing support to those who need it the most.
The next quarterly price cap update will be on 26 May 2023.
UK Government leaving people to prop up energy bosses’ profits, says STUC
Roz Foyer, STUC General Secretary, stated: “The energy price cap might have fallen today but the callous decisions of the UK Government means most people will be facing higher energy bills from April 1st. Thousands of people are being pushed into poverty and face choosing between a hot meal or a warm home.
“There is no justification for continuing to ask people across the UK to pay the price for energy companies billions of profit. We need to take back control of our energy system, tax these companies properly, and end the outrageous injustice of rising energy bills.”
Energy price hikes will cause ‘stress, anxiety, illness, debt and death’
Today (26 August) Ofgem has announced the energy price cap will increase to £3,549 per year for dual fuel for an average household from 1 October 2022.
This comes as Ofgem’s CEO warns of the hardship energy prices will cause this winter and urges the incoming Prime Minister and new cabinet to provide an additional and urgent response to continued surging energy prices.
The increase reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.
The price cap, as set out in law, puts a maximum per unit price on energy that reflects what it costs to buy energy on the wholesale market and supply it to our homes. It also sets a strict and modest profit rate that suppliers can make from domestic energy sales. However, unlike energy producers and extractors, most domestic suppliers are currently not making a profit.
The price cap protects against the so called ‘loyalty premium’ where customers who do not move suppliers or switch to better deals can end up paying far more than others. Ultimately, the price cap cannot be set below the true cost of buying and supplying energy to our homes and so the rising costs of energy are reflected in it.
Although Ofgem is not giving price cap projections for January because the market remains too volatile, the market for gas in Winter means that prices could get significantly worse through 2023.
Jonathan Brearley, CEO of Ofgem, said:“We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make. I talk to customers regularly and I know that today’s news will be very worrying for many.
“The price of energy has reached record levels driven by an aggressive economic act by the Russian state. They have slowly and deliberately turned off the gas supplies to Europe causing harm to our households, businesses and wider economy. Ofgem has no choice but to reflect these cost increases in the price cap.
“The Government support package is delivering help right now, but it’s clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year.
“We are working with ministers, consumer groups and industry on a set of options for the incoming Prime Minister that will require urgent action. The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this.”
Ofgem will continue to work with government, consumers groups, charities and suppliers, in supporting any new package of help or measures to ease the crisis.
Ofgem has also today strengthened the rules around direct debits to ensure suppliers set them at the right level, meaning that customers only pay exactly what they need to. The changes will stop suppliers from building up excessive customer credit balances and using them in a risky way as working capital.
Ofgem’s clear role is to protect consumers, and it has also today:
Strengthened requirements for suppliers to have sufficient control over the key assets they use to run their businesses. Together, this and the direct debit rule changes build on existing requirements to boost supplier resilience to better protect customers from costs associated with supplier failures.
Extended the Market Stabilisation Charge (MSC), which is paid by suppliers and helps protect customers from the cost of supplier failure.
Extended the ban on acquisition only tariffs which ensures all energy tariffs are available to existing as well as new customers, ensuring all consumers can get a fair deal on their energy.
Launched a review into the mechanism and level of profit margin available under the price cap to ensure that suppliers do not earn excessive profits and receive only a fair return for the services they provide to customers.
The new price cap level will take effect from 1 October 2022, but it is possible some suppliers may begin increasing direct debits before this date to spread costs. Customers worried about when their direct debit will increase should contact their supplier. Any money taken from customers to build up a credit will only ever be spent on their energy supply and customers can ask for their credit balance to be returned at any time.
Anyone worried about paying their bill should contact their supplier in the first instance. They are obliged to discuss payment plans and direct customers to government and third sector support where available. Ofgem is tightly monitoring suppliers’ performance in this area and has told all suppliers now is the time to step up their support for customers, especially those on low incomes or in a vulnerable situation.
Ofgem continues to monitor the impact of the price cap and to work with stakeholders and government on what more can be done for those least able to pay but most in need of energy.
When the new Prime Minister announces what additional support packages will be available, Ofgem will continue to examine how best it can help those groups of people that need it the most.
Reacting to today’s announcement by Ofgem, Poverty Alliance director Peter Kelly said: “The first moral duty of government is to protect people and provide them with security. The UK Government and Ofgem are failing badly in that duty and acting without any sense of compassion and justice.
“This massive price hike is in line with predictions. Ministers knew this was coming for months but have put nothing in place to prevent a humanitarian disaster.
“We must be clear. Bills of this size will be completely and utterly unaffordable for people on low incomes, many of whom have already been struggling with cuts to social security and huge wage squeeze for years and years. They will cause stress, anxiety, illness, debt and death.
“The UK Government must act now. It is simply not right that they continue to dither – prices must be frozen and targeted support must be put in place to help those most in need.”
Chancellor of the Exchequer, Nadhim Zahawi said:“I know the energy price cap announcement this morning will cause stress and anxiety for many people, but help is coming with £400 off energy bills for all, the second instalment of a £650 payment for vulnerable households, and £300 for all pensioners.
“While Putin is driving up energy prices in revenge for our support of Ukraine’s brave struggle for freedom, I am working flat out to develop options for further support. This will mean the incoming Prime Minister can hit the ground running and deliver support to those who need it most, as soon as possible.”
He later told the public to cut back their energy consumption – this from the man who once claimed parliamentary expenses for heating his stables!
This morning, Ofgem announced that the energy price cap will rise by 80%, taking typical household bills from £1,971 a year to £3,549 a year on 1 October.
People will rightly be worried by these huge price hikes. These eye-watering increases will simply be unaffordable for households up and down the country.
We’re demanding the government increase its support package for every household to at least £1,000, with extra support for the most financially vulnerable, or risk pushing millions of households into financial distress this winter. We also expect energy suppliers to ensure their customer service centres are adequately resourced to resolve queries quickly and help those struggling to pay their bills.
THE Government needs to spend £100 billion to freeze household energy prices for a year, according to an industry expert.Derek Lickorish, chairman of retailer Utilita Energy, told GB News: “Back in the banking crisis, Gordon Brown found £500 billion pounds to stop the banks falling apart and I’m advocating that we’re looking at about £100 billion to freeze prices for one year.
“At the moment, we don’t know what Liz Truss is bringing to the party and we don’t know whether it’s going to meet the size of the gap.
“While we have a price cap , when we get to the first of January, that figure is going to have a five in front of it, and it’s going to be another couple of thousand pounds and people cannot possibly afford to pay that amount of money for their energy bill.”
Speaking to Alastair Stewart on GB News, he added: “I think the area that needs to be looked at quite closely is the market structure, in terms of the way electricity is bought and sold, and I know there are plans to look at this now with some urgency.
“But you have a situation where you’re bringing on to the network power that has been effectively subsidised by the renewables obligation, yet they are getting these huge prices in terms of generation because the market price is set by gas.
“The wind doesn’t cost any more. The sun doesn’t cost any more. But these schemes are making an awful lot of money.
“To be fair, that’s about solutions that were brought in prior to 2017, so there was a change so that renewable projects from 2017 would get the price that they agreed.”
Asked to make a final point, Mr Lickorish said: “I want the Government to tell us what’s happening and it needs to be a very, very big number that we need to know now.
John Redwood MP, who has been tipped for a post in a new administration, suggested that VAT on energy will be scrapped for businesses when a new Prime Minister is in place.
“Cancelling VAT on fuel, at least temporarily while fuel costs are elevated, is a serious runner and any new government team will want to look at that,” he told Liam Halligan on GB News.
“I certainly agree with you that there are a lot of businesses under a lot of pressure and I think that must be part of a comprehensive package to explain to industry what help might become available.
“And what can be done about the excessive fuel bills that will directly now lead to some closures, as we’ve heard recently.”
Commenting on the energy price cap rise announced today, Crispin Truman, chief executive of CPRE, the countryside charity, said: ‘This winter’s energy bills are a ticking time bomb threatening to blow apart household finances.
“Rural areas, where wages are lower and homes often cost more to heat, will be devastated if the full force of the price rises are felt by consumers. The government must step in to prevent those living in the countryside from having to choose between eating and heating this winter.
‘We’ve been here before in the pandemic – the country is entering a national crisis that requires an emergency response. Ministers must urgently put in place direct financial support to get people through the winter, while working to deliver the only viable long term solution – improving the energy efficiency of our homes.
‘In addition to stratospheric energy bills, the cost of living crisis is being driven by a lack of housing and soaring rents for millions in the private rented sector. Homelessness is rising as half a million people languish on social housing waiting lists. In the Eden district of Cumbria, homelessness rates are more than four times what they were in early 2020.
‘Twiddling with taxes won’t cut it. To ease the cost of living crisis the government needs to provide immediate monetary support. To prevent a generation of rolling winter crises, we need to get off gas and rapidly invest in home insulation and cheap renewable energy. A longer term fix must also include providing many more social and affordable homes.’
The UK Government sets out the background to the issue of wholesale gas prices and the action the it is taking to protect the UK’s energy supply, industry, and consumers:
There has recently been widespread media coverage of wholesale gas prices, and the effect this could have on household energy bills. The impact on certain areas of industry, and its ability to continue production, has also attracted attention.
This explainer sets out the background to the issue and the action the government is taking to protect the UK’s energy supply, industry, and consumers.
Natural gas prices have been steadily rising across the globe this year for a number of reasons. This has affected Europe, including the UK, as well as other countries around the world.
We have a diverse range of gas supply sources, with sufficient capacity to more than meet demand. The UK’s gas system continues to operate reliably and we do not anticipate any increased risk of supply emergencies this winter.
Why are there high global gas prices?
The prices that are currently visible reflect the high value being placed on gas at the present time, with prices being determined by global supply and demand. They are not necessarily representative of pre-existing contracts and therefore do not apply to all of the gas being consumed in the UK this winter.
Current prices reflect a number of factors including:
as the world comes out of COVID-19 lockdowns and economies reopen, we are seeing an uptick in global gas demand this year. *combined with a cold winter (which has an impact on gas demand as gas is often used for heating homes) this has led to a much tighter gas market with less spare capacity
in particular, high demand in Asia for Liquified Natural Gas (LNG), natural gas transported globally by ship, means less LNG than expected has reached Europe *some essential maintenance projects rescheduled from 2020 due to coronavirus coincided with necessary scheduled projects in 2021, while weather events in the US have adversely affected their LNG exports to Europe
How are high global gas prices impacting the UK?
The gas market is crucial to the UK’s energy supply because of its significance in heating, industry and power generation.
Over 22 million households are connected to the gas grid and in 2020, 38% of the UK’s gas demand was used for domestic heating, 29% for electricity generation and 11% for industrial and commercial use.
High gas wholesale prices have subsequently driven an increase in wholesale power prices this year.
In recent weeks, this trend has been exacerbated by the weather and planned maintenance at some power stations. This has resulted in unusually low margins for this time of year. These factors have combined to cause spikes in wholesale electricity prices, with a number of short-term markets trading at, or near, record levels.
While we are not complacent, we do not expect supply emergencies this winter.
Is our gas supply at risk?
The Great Britain (GB) gas system has delivered securely to date and is expected to continue to function effectively, with a diverse range of supply sources and sufficient delivery capacity to more than meet demand.
While our largest single source of gas supply continues to be the UK Continental Shelf (approximately 48% of total supply in 2020), the maturity of that source means we have to supplement supply from international markets.
Whilst the diversity of those international sources promotes our energy security, by reducing reliance on a particular source, the UK – as with other nations – is exposed to global trends in supply and demand which affect the price of gas traded at UK’s market hub (the National Balancing Point).
We have a wide range of supply sources including direct pipelines across the North Sea from Norway to the UK, our single biggest source of imports. We are also investing millions into scaling up strong renewable energy capacity and driving down demand for fossil fuels.
GB also has a number of gas storage facilities that act as a source of system flexibility when responding to short-run changes in supply and demand.
What is the government doing on this?
Energy security is an absolute priority for this government. The government works closely with the regulator and gas supply operators to monitor supply and demand.
While wholesale gas prices have increased internationally this year, the market continues to balance supply and demand through adjusting the prices at which energy trades take place. We have no reason to suggest this will not continue but will monitor the market.
National Grid Gas has a number of tools at its disposal to mitigate the risk of a gas supply emergency, including requesting additional gas supplies be delivered to the National Transmission System. Together with the Department for Business, Energy and Industrial Strategy (BEIS), National Grid Gas has robust response plans in place in the unlikely event that risk should materialise. Read plans for network gas supply emergencies.
Will this affect energy bills?
The high wholesale gas prices that are currently visible may not be the actual prices being paid by all consumers.
This is because major energy suppliers purchase much of their wholesale supplies many months in advance, giving protection to them and their customers from short-term price spikes.
The Energy Price Cap is also in place to protect millions of customers from the sudden increases in global gas prices this winter. Despite the rising costs of wholesale energy, the cap still saves 15 million households up to £100 a year.
The current global wholesale gas price situation as set out above could have an effect on companies.
Companies without longer-term contracts may face higher costs, but we expect that companies with longer-term contracts in place may have little exposure to the current high wholesale prices. If there were an event where a supplier fails, Ofgem would work to ensure that customers are moved to a new supplier, so they are not without energy.
How is the government helping poorer households?
Our Energy Price Cap will protect millions of customers from the sudden increases in global gas prices this winter.
We are also supporting low income and fuel poor households with their energy bills in a number of ways which demonstrates the government’s commitment.
This includes through:
the Warm Home Discount which provides eligible households with a £140 discount
in addition, Winter Fuel Payments and Cold Weather Payments will help ensure those most vulnerable are better able to heat their homes over the colder months
Vulnerable people and anyone in financial distress during this time should talk to their energy supplier, who will be able to discuss personal circumstances and consider options to help, including reassessing, reducing or pausing payments. Emergency measures have been agreed between government and energy suppliers to support those most in need during the disruption caused by COVID-19, and this agreement remains in place this winter. Read details of the agreement.
As set out in the Energy white paper, we plan to extend the Warm Home Discount until 2026, increase it to £150, and help an extra 780,000 pensioners and low-income families with their energy bills. With a total of 2.7 million to get support, with the vast majority to receive the money back automatically, without having to apply as at present.
Cold Weather Payments provide vulnerable households on qualifying benefits with financial support when the weather has been, or is forecasted to be, unusually cold. £25 is available for eligible households for each 7 day period of very cold weather between 1 November and 31 March.
Business and Energy Secretary meets and energy industry chiefs
Business and Energy Secretary Kwasi Kwarteng held a series of individual meetings with senior executives from the energy industry yesterday to discuss the impact of high gas prices, driven by international supply and demand factors.
During the calls, the Secretary of State was reassured that security of supply was not a cause for immediate concern within the industry. The UK benefits from having a diverse range of gas supply sources, with sufficient capacity to more than meet demand. As previously stated, the UK’s gas system continues to operate reliably and we do not anticipate any increased risk of supply emergencies this winter.
The Secretary of State stressed that energy security is an absolute priority for this government. We are confident that security of supply can be maintained under a wide range of scenarios. Great Britain also benefits from a diverse electricity mix, which is one of the reasons why we have one of the most reliable electricity systems in the world.
Whilst our largest single supply source of gas continues to be from domestic production – and the vast majority of imports come from reliable suppliers such as Norway – the UK’s exposure to volatile global gas prices underscores the importance of the government’s plan to build a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels.
The pressure being faced by some energy companies was also discussed during the meetings after four small suppliers ceased to trade in recent weeks. Ofgem has robust measures in place to ensure that customers do not need to worry, their needs are met, and their gas and electricity supply will continue uninterrupted if a supplier fails.
If the appointment of a Supplier of Last Resort is not possible, Ofgem and the Government have agreed processes in place to appoint a special administrator to temporarily run the business until such time as a new supplier can be found for the customers.
The Secretary of State also stressed the importance of protecting vulnerable customers during a time of heightened global gas prices. Government initiatives such as the Warm Home Discount, Winter Fuel Payments and Cold Weather Payments will help ensure those most vulnerable are better able to heat their homes over the colder months. The Energy Price Cap is also in place to protect millions of customers from the sudden increases in global gas prices this winter.
The Business Secretary will be meeting with Ofgem this morning to discuss the issues raised by the industry in more detail, and on Monday he will convene a roundtable with industry to plan a way forward.
The Secretary of State is also working in contact with colleagues across government to manage the wider implications of the global gas price increase.
