Tag: fuel poverty

Ofgem: Increased wholesale energy costs lead to rise in price cap

Energy regulator Ofgem has today (Thursday 23 November, 2023) announced the energy price cap for the first quarter of 2024.  

The price cap will increase by 5% on the previous quarter from 1 January to 31 March 2024. For an average household paying by direct debit for dual fuel this equates to £1,928, a rise of £94 over the course of a year – around £7.83 a month. The price cap, updated every quarter, sets a maximum that can be charged to customers for energy bills. 

Ofgem’s priority is to protect consumers and ensure that they pay a fair price for their energy. Today’s price increase is driven almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine. 

The regulator will continue to use all levers available to ensure costs are spread fairly and   customers struggling with bills are supported. It has today further developed plans to permanently remove the so-called ‘prepayment meter premium’ to ensure that prepayment customers are charged the same standing charge as direct debit customers. Ofgem has already launched a ‘Call for Input’ on standing charges running until 19 January, 2024. 

Jonathan Brearley, CEO of Ofgem, said: “This is a difficult time for many people, and any increase in bills will be worrying. But this rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay. 

“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills. 

“We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap.  

“People should weigh up all the information, seek independent advice from trusted sources and consider what is most important for them whether that’s the lowest price or the security of a fixed deal.” 

Ofgem recently set out new rules for suppliers making clear that they should be prioritising enquiries from vulnerable customers who need help and proactively reaching out to households if they miss two monthly or one quarterly payment, check to see if they are struggling with bills and, if so, offer support such as affordable payment plans or, if appropriate, repayment holidays. 

The regulator has also taken robust action to raise standards of customer service and worked in conjunction with suppliers and consumer groups to encourage industry to support those struggling with their bills, including the Winter 2023 Voluntary Debt Commitment recently announced by Energy UK and Citizens Advice. 

A Statutory Consultation on levelling standing charges for prepayment meter and direct debit customers so customers pay the same daily charge has been published today.  

Previously, customers on prepayment have been charged more than those who pay by direct debit to cover the additional costs and resources required by suppliers to provide their services. 

In October 2022, the government introduced measures to temporarily remove this ‘PPM premium’ via the Energy Price Guarantee, which remains in place until April 2024. 

Following a consultation this summer, Ofgem is now proposing an enduring solution that would ‘levelise’ these standing charges to coincide with the end of that government support. This consultation also sets out proposals to share the costs of bad debt more equally across customers to reduce the premium paid by standard credit customers (those who pay on receipt of a monthly or quarterly bill for the exact amount of energy used). 

Under the terms of the regulator’s proposal, this would save PPM customers around £50 a year, reduce Standard Credit bills by around £45 a year but add around £20 a year for direct debit customers. Ofgem is keen to hear views on this proposal from all interested parties.    

This follows the launch of a wider conversation on the issue of standing charges last week and how they should be set, which has already attracted a high number of responses in the first week of the consultation. 

In response to today’s Ofgem energy price cap announcement, Joanna Elson CBE, Chief Executive of Independent Age said: ““Today’s energy price cap announcement offers little reassurance for older people in financial hardship, with bills still 85% higher than before the energy crisis.  

“We speak to people in later life who are living in one room because they can’t afford to properly heat their home, those who risk falls because they aren’t turning on the lights, and older people who are in thousands of pounds of debt to energy suppliers. They urgently need help.  

“With average energy prices having close to doubled in recent years, coupled with rocketing household costs such as water, food and broadband, those on a low income have endured several years of sky-high costs from all angles. Older people in financial hardship are especially vulnerable to sharp price increases, as many are on a fixed income. The extra money simply isn’t there. 
 
“The UK Government needs to announce financial support now to help the most financially vulnerable, including those in later life, get through this winter. After that, we need a long-term solution to protect against the impact of continuing high prices, including energy.

“Our evidence shows an energy social tariff would offer more stability to older people on a low income and make sure no one is forced to make dangerous choices. This must be something the UK Government consults on.” 

The next quarterly price cap announcement will be announced in February 2024, covering April – June 2024. 

Changeworks energy advice at PCHP

FRIDAY 10th NOVEMBER from 9am – 11am

at PILTON COMMUNITY HEALTH PROJECT

This Friday, 10th of November, between 9:00 and 11:00 am, come to Pilton Community Health Project for much needed #energyadvice.

Changeworks will be here providing expert advice on how to #savemoney this winter while staying warm and cosy.

Warm Up for Winter event

4th NOVEMBER from 1 – 4pm at McDONALD ROAD LIBRARY

Don’t miss out on our Warm Up for Winter event where energy-saving hacks and money-saving tips will be provided.

We will share advice on housing and benefits too.

Best part? It’s a totally free event, and everyone’s invited!

📅 Save the Date: November 4, 2023

🕐Time: 1:00 PM – 4:00 PM

📍 Where: McDonald Library, The Nelson Hall

🏠 Address: 2-8 McDonald Rd, Edinburgh EH7 4LU

This is a joint event delivered by Edinburgh and Lothians Regional Equality Council (ELREC), The Welcoming Edinburgh, Home Energy Scotland, Changeworks, Citizens Advice Scotland, VoiceAbility and Right There

See you there!

Have your say on plans for Pension Age Winter Heating Payment

Consultation on new benefit to help with fuel costs

Views are being sought on the introduction of the Pension Age Winter Heating Payment, a new benefit to replace the UK Government’s Winter Fuel Payment in Scotland.

The Scottish Government has previously committed to delivering the new payment on a like-for-like basis with the existing benefit. It will help more than a million pensioners with heating costs in the winter.

The consultation document sets out proposals for implementing the new payment when it is introduced from the winter of 2024 and asks for responses, which can be submitted until 15 January.   

The public’s views on issues such as who should be eligible, the timing and format of the payment and the likely impact of the benefit, are being sought – as well as further evidence about issues specific to people who are off the gas grid.

Social Justice Secretary Shirley-Anne Somerville said: “Pension Age Winter Heating Payment will seek to safely and securely transfer responsibility for the delivery of Winter Fuel Payment to the Scottish Government, ensuring that more than a million pensioners currently eligible for Winter Fuel Payment continue to receive this support.

“This will be an investment of around £180 million in 2024-25 to help older people with the costs of heating their homes throughout the winter.

“Working with individuals and organisations with experience of the benefits system is central to our approach to developing the devolved social security system in Scotland.

“We are now looking for the public’s views, as well as those of relevant experts and organisations – through this consultation – to finalise our policy on this important benefit.”

Pension Age Winter Heating Payment consultation

Ofgem: Further reduction but ‘winter will be tough’

‘MANY FAMILIES WILL STILL STRUGGLE’

Energy regulator Ofgem has today (Friday, 25 August, 2023) announced a further reduction in the energy price cap for the last quarter of 2023 (Oct to Dec).     

The change will bring the average dual-fuel energy bill below £2,000 a year for the first time since April 2022, saving households an average of £151 on the previous quarter.   

From 1 October – 31 December, the cap will be set at an annual level of £1,923 for a dual fuel household paying by direct debit based on the current typical domestic consumption values (TDCV) rate. 

 Direct Debit Prepayment Standard Credit Economy 7 (electricity only Direct Debit) 
July – Sept 2023 cap £2,074 £2,077 £2,211 £1,400 
Oct – Dec 2023 cap £1,923 £1,949 £2,052 £1,298 

The drop, the lowest level since October 2021, reflects further falls in wholesale energy prices, as the market stabilises and suppliers return to a healthier financial position after four years of loss making.   

Ofgem is clear that it expects all suppliers to continue improving customer service, to support their most vulnerable customers and to shore up their financial resilience to prevent the kind of failures we saw two years ago. Ofgem recognises that there is some excellent best practice across the sector but expects this to be the norm with poor practice stamped out. 

Alongside changes to the price cap, Ofgem has also introduced measures to reduce costs for prepayment meter customers and ensure extra support for those facing disconnection from the network.   

The price cap savings – which can be passed on more quickly to customers thanks to the price cap updating quarterly – continues the downward trend since prices peaked at £4,279. However, it remains well above the average before the energy crisis took hold in 2021 and the market remains volatile.   

Jonathan Brearley, Ofgem CEO, said: “It is welcome news that the price cap continues to fall, however, we know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter. 

“That’s why we’ve introduced new measures to support consumers including reducing costs for those on pre-payment meters, and introducing a PPM code of conduct that all suppliers need to meet before they restart installation of any mandatory PPMs.   

“There are signs that the financial outlook for suppliers is stabilising and reasonable profits are returning. With the small additional allowance we’ve made to Earnings Before Interest and Tax (EBIT), this means there should be no excuses for suppliers not to be doing all they can to support their customers this winter, and to reinforce this we’ll be introducing a consumer code of conduct which we will look to have in place by winter.

“This code will ensure there are clear expectations of supplier behaviours especially for their most vulnerable consumers with whom suppliers should be reaching out proactively, with compassion and understanding. There are great examples of suppliers already doing this but I want to see this become the norm in such an essential sector that has such a big impact on people’s lives.” 

Ofgem understands that while suppliers cannot control wholesale prices or fix the wider cost of living pressures hitting their customers, now the market has stabilised, they must continue improving customer service and ensure that support across the board is accessible, responsive and understanding, including giving time to make pay arrangements and directing customers to further support and advice. They must also invest in strengthening their financial resilience to protect consumers against the cost of supplier failure. 

Additionally, while still low by pre-crisis levels, we are starting to see more and more competitive fixed deals coming onto the market and levels of switching are slowly increasing.

With a lower price cap and reasonable profits starting to return, there is an opportunity for this to continue to grow. Anyone considering fixing should weigh up all the facts and consider what is most important to them, whether that’s the lowest price, or the certainty of knowing exactly what they will pay each month.

It’s important customers are comparing fixed deals with the new, lower price cap announced today. Suppliers are expected to ensure they are transparent in releasing all tariff information to enable consumers to make simple comparisons of the deals available to them across the market.  

While the price cap has protected households from the full extent of volatility and surges in wholesale prices over the last two years, it was originally introduced by the Government to protect the minority of consumers who did not switch rather than to cover the vast majority of consumers, as it does now.

It is a blunt tool and in the current market it has costs and as well as benefit. It’s important to look at alternative models to examine whether they could work better with the current volatile market and the move to net zero. 

 Ofgem has also today published:    

  1. A Final Decision to raise the Earnings Before Interest and Tax (EBIT) allowance by £10 per customer per year. Most of this increase is to cover Renewable Obligations ringfencing so that customers’ money is protected in the event of a supplier failure. 
  2. Removal of the temporary RO ringfencing allowance, worth £8 per customer and covered by the additional EBIT costs above  
  3. A new sliding scale for EBIT meaning if prices surge, the EBIT allowance reduces as a percentage preventing suppliers from making excessive cash gains from a high price market  
  4. Final decision on the allowance for additional support credit (ASC) bad debt costs – a new allowance to help ensure some of the most vulnerable consumers remain on supply this winter  
  5. Implementation of UNC840 in the cap, reducing the PPM premium  
  6. Price Cap model technical changes Final Decision  
  7. Levelisation Policy Consultation  

By raising the EBIT allowance, Ofgem is taking the next step in its drive to make the retail energy sector more resilient, as we move into another difficult winter when price volatility remains a risk.  

At the height of the energy crisis around 30 suppliers failed because they did not have enough capital in the reserve to stay in business – and the cost was shared among all energy consumers, adding £83 to bills.  

With suppliers only now starting to recoup a portion of their multi-billion pound losses over the past four years, a small increase in permitted profit margins will allow companies to better cover their costs, attract investment and retain financial stability protecting consumers into the future.  

Raising the EBIT allowance from its current rate of 1.9% to 2.4% from 1 October will involve an average £10 increase in bills per year. £8 of this will cover costs to consumers incurred by an additional requirement of suppliers to ringfence enough funds to cover their Renewable Obligations, protecting consumers from additional costs should a supplier go bust.    

The EBIT rate, which is well within international norms for energy retail profits and lower than most other business sectors in Britain, will also be altered from a ‘flat rate’ to a more flexible model that tracks the price cap level and tapers as low as 1.75% in the event of another price surge in the wholesale market. This would prevent suppliers from making excessive cash profits in a high-cost market. 

Strengthening the commitment to supporting struggling and vulnerable consumers, Ofgem is also reducing the cap for prepayment meter (PPM) customers by £51 per year through an updated approach to calculating the costs of unidentified gas, approved in April this year.  

Using some of the benefit from this change, the regulator is now able to introduce an initial 12-month allowance to cover increased debt costs associated with Additional Support Credit that is offered to PPM customers, often at the point of disconnection. This new allowance will help ensure some of the most vulnerable consumers remain on supply this winter.   

Longer term, Ofgem seeks to permanently end the PPM premium, where prepayment customers are charged more than those who pay by direct debit to cover the additional costs and resources required by suppliers to provide energy via PPM. A consultation is underway with an aim to ‘levelise’ these standing charges by April 2024 to coincide with the end of government support currently in place via the Energy Price Guarantee.  

Morgan Vine, Head of Policy and Influencing at Independent Age said: “Today’s Price Cap announcement offers little comfort to older people living on a low income and struggling to get by.

“Our helpline is continuing to hear from people in later life in financial hardship who have been forced to make sacrifices to pay their bills, including eating one meal a day, washing themselves in freezing cold water, and risking falls by not turning on the lights at night.  

“Gas unit costs are still well over double what they were in winter 2020/21 and electricity unit costs are up by over half. The fixed incomes of older people in financial hardship simply cannot keep up with these increases. Long term solutions to protect the most financially vulnerable from high energy prices are desperately needed. 

“We’re calling on the government to introduce an energy bills social tariff for those in greatest needed, including people over 65 on a low income and those who have high energy consumption due to illness.

“This long term and sustainable solution would offer some protection to people in later life living on low incomes, so they aren’t forced to make dangerous choices now, and as we approach the winter. “

The next quarterly price cap announcement will be in November 2023, covering January – March 2024.   

£30 million made available for Fuel Insecurity Fund

First Minister announces increased support for households with energy costs

Up to £30 million will be made available through the Fuel Insecurity Fund next year to help households who are at risk of self-rationing or self-disconnecting their energy use, First Minister Humza Yousaf has announced.

The funding will be made available to third sector organisations in the next financial year to support the most vulnerable households in Scotland.

The Scottish Government had previously committed to doubling the Fuel Insecurity Fund, from £10 million to £20 million.

Previous funding has been provided to third sector organisations including the Fuel Bank Foundation, Advice Direct Scotland and Scottish Federation of Housing Associations to provide direct support to households.

First Minister Humza Yousaf said: “I have said my immediate priority is to do everything we can to protect every Scot as far as possible from the harm inflicted by the cost-of-living crisis.

“That is why, in one of my first acts as First Minister, I can confirm today that we will build on our commitment to double the Fuel Insecurity Fund from £10 million to £20 million – to now triple it to £30 million for 2023-24.

“In a country as energy rich as Scotland, we should not have people living in fuel poverty. My government will renew and redouble our efforts to lift people out of poverty, to make work fair, to make our economy work for the people.

“With energy bills still at historically high levels and the UK Government’s Energy Bills Support Scheme being withdrawn from 1 April, over the next year our Fuel Insecurity Fund will continue to be a vital lifeline for many struggling households in the country.

“It is of course only as a result of the UK Government’s mismanagement of the economy and the cost of living crisis that we are having to take this action. This Scottish Government will always put the interests of the people of Scotland first.”

More information on the Fuel Insecurity Fund.

Chancellor to end ‘prepayment meter penalty’

– Chancellor declares “prepayment meter penalty over from July”, cutting energy bills for over four million families.
– Families on prepayment meters will no longer pay more compared to people on direct debts.
– Follows support this winter which has already cut the typical household bill by almost half.

OVER FOUR MILLION families are set to save £45 a year on their energy bills from July as the Chancellor ends the prepayment premium.

Households on prepayment meters pay more on average compared to direct debit customers due to extra costs firms take on managing meters – such as supplying vouchers and collecting payments – being passed on to users.

The vast majority of households who rely on prepayment meters are typically vulnerable or low income, which means the higher tariff and inability to spread the cost is hitting those who can least afford it.

At his Spring Budget next week, the Chancellor is expected to announce fairness reforms to energy bills, bringing the bills of families on prepayment meters in line with average direct debit energy bill under the Energy Price Guarantee.

Chancellor of the Exchequer, Jeremy Hunt said: “It is clearly unfair that those on prepayment meters pay more than others. We are going to put an end to that.

“From July four million households won’t pay more than those on direct debits. We’ve already cut energy bills by almost half this winter, and this latest reform is proof again that we’re always on the side of families.”

Energy Security Secretary Grant Shapps said: “Charging prepayment meter customers more to receive their energy is a tax on some of our most vulnerable – this change will stop that.

“It’s even more important at a time Brits are faced with high energy costs and when we’ve seen vulnerable households wrongly forced onto them. While actions I’ve pushed for have meant forced installations are on pause, warrants aren’t being waved through and Ofgem is toughening up its reviews, our changes will make sure families aren’t penalised simply for how they heat their home.”

The change is expected to come into effect from July 1 through updates to the Energy Price Guarantee at a cost of £200 million.

From April 2024, when the Energy Price Guarantee ends, the Chancellor has tasked energy regulator Ofgem to report back on additional regulatory options to permanently end the premium and bring fairness to bill payment methods in the long term.

The move is the latest government intervention to help families with their energy costs after the average family bill was cut by £1300 this Winter.

Harbour Homes receives lottery award to help tenants experiencing fuel poverty

Harbour Homes has received an award from The National Lottery Community Fund, made possible by National Lottery players, to help tenants of seven housing associations with fuel poverty and energy efficiency during the cost of living crisis.

Harbour Homes, along with six other landlords that make up the ARCHIE alliance, own and manage 6,000 socially rented properties in Edinburgh.

A recent tenant survey from one of the ARCHIE members found that 40% of tenants had not put their heating on as they could not afford to heat their homes.

The funding allows Harbour Homes to hire two Energy Advice Officers who will:

  • Provide support to reduce fuel poverty, including support to deal with energy debt and avoiding future, energy debt, by proactively identifying households at risk and responding to referrals from ARCHIE members
  • Promote the service to external agencies supporting tenants and work in partnership with local organisations and wider fuel poverty initiatives to better support tenants directly
  • Deliver energy advice workshops and drop in events at local community venues supporting local people with free information and advice
  • Develop materials to share advice and information on energy efficiency for tenants, staff and the wider community
  • Help tenants adjust to net zero energy improvements such as solar panel installation or new heating systems

Heather Kiteley, Group Chief Executive of Harbour, said: “It is vital that we support our tenants at such a challenging time. I’m glad we can offer this service to our tenants and those of the six other members of the ARCHIE alliance.

“With the removal of energy price caps on the horizon and other funding sources and organisations being oversubscribed, this will be a real lifeline for people experiencing the horrendous consequences of fuel poverty.”

The National Lottery Community Fund Scotland Chair, Kate Still, said: “This project, delivered by Harbour Homes Scotland Limited, is a great example of community activity in action, showing just what can be achieved when people come together for a common cause or to help others.

“It’s all thanks to National Lottery players that we can help give charities and community groups throughout Scotland greater certainty during challenging times.”

OFGEM announces latest update to energy price cap

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.”