Ofgem has confirmed the worst price hike in energy costs in the history of the price cap.
According to End Fuel Poverty Coalition estimates, the £139 rise (equating to 12.2%) will result in an additional 488,000 households in fuel poverty.
Over 4m people are already estimated to be behind on their household bills and the price cap rise will take effect this autumn at the same time as the furlough scheme and the Universal Credit uplift end.
This unprecedented hike in energy bills comes at the worst possible time for millions of households across the country.It is difficult to put into words just how devastating this news will be for people.Especially hard hit will be vulnerable customers and those on pre-pay meters who are unable to switch suppliers and will be facing a winter in abject fuel poverty.Switching advice and the price cap may provide some protection from the worst excesses of the energy market, but this will be no comfort to those now facing the stark choice between heating and eating.The Government must take immediate action to provide emergency support for those who suffer due to the decision and speed up plans to improve the energy efficiency of the nations’ homes.
The Big Issue has recently warned of increasing levels of homelessness, caused in part by fuel poverty. Jacky Peacock from Advice for Renters, commented:
Recent research by the Joseph Rowntree Foundation found that 400,000 private renters already face eviction for Covid related rent arrears and up to a million are worried about being evicted in the next three months . The hike in fuel costs could be the final nail in the tenancy coffin for these tenants, with homelessness escalating at a cost of billions to the public purse.
William Baker from Solutions to Tackle Energy Poverty (STEP) commented:
The massive rise in fuel bills caused by the price cap hike will affect most those hit hardest by the impacts of Covid and lockdown. It’s essential that the Government does not cut the £20 increase in Universal Credit this September and accelerates plans to improve home energy standards so that low income consumers waste less money on heating leaky homes.
Fuel poverty can make respiratory illnesses worse – meaning conditions such as Covid may be exacerbated by living in cold damp homes.
Ian Preston, head of household energy at the Centre for Sustainable Energy said:
The energy advice sector will face a tsunami of demand from people needing support once furlough ends, benefits reduce and bills go up. This price increase on energy bills is hitting at the worst possible time; just before winter, when millions of people are already struggling to pay their bills and people are spending more time at home than ever due to the pandemic.
Cold homes cause misery, ill-health and social exclusion. Many government and industry support programmes are due to end soon and people will struggle to survive. A warm home is a basic human right and it’s going to be a really tough winter unless we see action to maintain support for people in vulnerable circumstances.
Caroline Abrahams, Charity Director at Age UK, added:
The level at which energy prices are capped is of enormous importance to older people, because we know they are less likely to switch providers for a better deal – especially if they are not online, which is the case for about half of the 75+ population. For all those who are therefore effectively stuck on their existing tariffs, the best protection they have against unfair and unaffordable fuel bills is a robust energy price cap. Unfortunately, the fact that the cap is going up significantly this year will set them up for a miserable and anxious winter.We know that many older people resist turning their heating up high enough to stay warm during cold spells, for fear of the cost. Sadly, today’s announcement is likely to mean even more older people find themselves in this horrible position and energy suppliers must identify and support those that will struggle in the cold months to come.
National Energy Action has developed a briefing setting out the support and solutions the government can implement. Peter Smith from NEA said:
This is a devastating increase. Millions of household budgets are already stretched to the limit and this massive increase could not be coming at a worse time. As well as a significant rise in general inflation – driving up spending on other essentials such as food – the new cap level takes effect in October when millions of people will see a reduction in their incomes, as furlough winds down and the uplifts to Universal Credit are likely to be withdrawn. This toxic combination of higher prices, reduced incomes and leaky, inefficient housing, will lead to a further surge in utility debt and badly damage physical and mental health this winter.
There is far more Ofgem and the UK Government can do to help to protect the most vulnerable consumers this winter. For years Ofgem and [the UK] Government have insisted the way to avoid increases to bills is to switch. Many fixed deals have however come to an end and for some customers switching is impossible due to levels of debt or because pre-pay customers have far fewer options to switch supplier or tariff. There may be limited scope to mute the impact of soaring wholesale prices within the cap, but Ofgem can and must provide deeper protection for the most vulnerable customers. The UK Government can also directly help reduce energy arrears as well as maintaining investment to reduce needless energy waste in our homes.
Ruth London, co-director of Fuel Poverty Action, concluded:
The massive increase in price-capped energy bills will be a body blow to millions, and advice to shop around for cheaper deals does not add up as a solution: If everyone affected switched, the deals would disappear, to cover suppliers’ costs and profits. Finding a better deal is laborious and suppliers rely on catching out those who are not only cash poor, but time poor. Placing the onus on victims to individually find an escape from the price hike is a false solution. Change needs to go beyond redistributing poverty.
We need a new pricing framework, where poorer people don’t pay higher rates than the rich. We need well-insulated housing, renewable energy, new heating systems, and wages and benefits that meet our costs. Fuel Poverty Action believes the government should investigate a totally new pricing system where everyone is guaranteed, free of cost, the basic energy we need for our homes and our health, while more cost falls on those who are heating mansions or joy-riding into space.