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.