Price cap sees energy costs double in three years

The latest Ofgem price cap announcement has set energy prices for 29m households for October, November and December 2023.

In the detail of the figures it shows that, when compared to winter 2020/21, the cost of every unit of energy used is around double what it was. Daily standing charges for gas are up 8% and for electricity up 119%.

Compared to last winter, unit costs are down 30% for gas and 15% for electricity, but daily standing charges are up 4% for gas and 15% for electricity, while the Energy Bills Support Scheme has been withdrawn (which was worth about 16% of an average bill).

Ofgem has also confirmed that energy firms can increase the amount of profit they make through the price cap by c.£2 a year for every average customer on the standard variable tariff.

A spokesperson for the End Fuel Poverty Coalition, commented:

“When you look at the details of this price cap, the reality is that every unit of energy a customer uses costs double what it did a few years ago. The daily standing charges customers pay have also increased – doubling in the case of electricity.

“The Energy Bills Support Scheme has also been taken away this winter, while energy firms have been allowed to increase the profits they make per customer and vulnerable households have been left wondering what will happen this winter and beyond.

“Meanwhile the cost of living crisis continues to hit households hard and everyone now has less ability to pay these high energy prices. Energy debt levels continue to surge and reports from several charities and think tanks in recent days have set out just how dangerous this winter will be – especially for the most vulnerable.”

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

“The government seems to think the energy crisis has gone away, but for millions of households this autumn will be as hard as the last.

“People are still paying double what they were just a few years ago, and for some households their bills will be more than they were last year because of the lack of government support and rising standing charges. Levels of energy debt are also soaring.

“People will rightly ask what this government has done over the past year and a half to fix Britain’s broken energy system and lower bills for good.

“Instead of bowing to the wishes of profiteering oil and gas giants for more drilling, which won’t lower our bills, it needs to help people save money with more support for insulation and get on with ramping up cheaper renewables. That’s the only way we’re going to see permanently lower energy bills.”

National Energy Action (NEA) have warned that 6.3 million households could be trapped in fuel poverty this winter. It is somewhat less than last year, but far ahead of the 4.5 million in October 2021. Chief Executive Adam Scorer commented:

“The price cap does not protect those who simply cannot afford the cost of keeping warm. The UK Government can still act – by directly reducing energy bills via targeted energy discounts or a more targeted Energy Price Guarantee for low-income and vulnerable households.

“It knows how to do it. It has millions of pounds unspent from previous schemes. It is aware that failing to act will consign millions to another winter of despair and suffering.”

The End Fuel Poverty Coalition recently wrote [pdf] to the Speaker of the House of Commons and the chair of the Commons Energy Security & Net Zero Committee to highlight the five occasions in 2023 when leading members of the Government, including the Prime Minister, promised to consult on the introduction of a social tariff.

In the recent policy paper, “Delivering a Better Retail Energy Market”, there is no mention of social tariffs or the introduction of discounted tariffs for the most vulnerable.

While there are some references to vulnerability and tariff innovation in the recently published consultation “Towards a more innovative energy retail market”, there is no mention about how the retail market needs to be reformed to provide vulnerable households with access to the energy they need and additional protections they may need in a market-led approach to energy supply.

The End Fuel Poverty Coalition has urged MPs to hold the Government to account and ensure that the introduction of a form of “social tariff” from April 2024 (or alternative consumer protection for vulnerable customers, such as “energy for all,” the National Energy Guarantee or a Energy Costs Support Scheme), will be considered by the Government as a matter of urgency.

The End Fuel Poverty Coalition spokesperson continued:

“Ministers had promised to consult on tariff reform to help the households most in need and who most rely on energy to keep themselves safe. Sadly, they have abandoned plans for a social tariff consultation.

“The Government seems to be running out of enthusiasm to help people get through the energy bills crisis, and it is also now running out of time to act to keep people warm this winter.”