Energy price rises and price cap discussion.

[ld0595]

News out today saying the price cap is expected to increase by another £900 in October this year.

Energy price cap: Typical energy bill set to rise by £800 a year in October

Industry regulator Ofgem warns households that they should expect higher energy bills this winter.

www.bbc.co.uk

The boss of the UK's energy regulator warned the energy price cap is expected to rise to around £2,800 in October.

Jonathan Brearley told MPs that the price cap, which is currently at £1,971, will increase due to continued volatility in the gas market. He said the price rises were a "once in a generation event not seen since the oil crisis in the 1970s".

The Ofgem chief executive also warned that the number of people in fuel poverty could double. He apologised and pledged to "fix" the energy market.

The energy price cap is the maximum price per unit that suppliers can charge customers. It has already risen sharply in April, meaning that homes using a typical amount of gas and electricity are now paying an extra £700 per year on average.

While Mr Brearley said that Ofgem was only part way through reviewing prices ahead of the change in autumn, he said: "We are expecting a price cap in October in the region of £2,800." He said that conditions in the global gas market had "worsened" following Russia's invasion of Ukraine, which has led to concerns of potential supply issues.

And Mr Brearley warned that the price cap could rise beyond £2,800 if Russia - one of the world's largest exporters of natural gas - decided to disrupt supplies. "We are really managing between two versions of events," he said. "One where the price falls back down to where it was before, for example if there's peace in Ukraine, but one where prices could go even further if we were to see, for example, a disruptive interruption of gas from Russia."

Europe is reliant on Russian gas and gets about 40% of its natural gas from Russia, so sudden supply cuts could have huge economic impact.While the UK would not be directly impacted by supply disruption as it imports less than 5% of its gas from Russia, it is affected by prices rising in the global markets as demand in Europe increases.

This really cannot continue like this any more. People are literally going to freeze, starve or both this winter. It's fast becoming unsustainable even for those on decent incomes.

I'm in the incredibly fortunate position that I can continue absorbing these price rises but I'm starting to notice it myself. It's going to be a very difficult winter for the vast majority of people.

 

[DelayRepay]

This really cannot continue like this any more. People are literally going to freeze, starve or both this winter. It's fast becoming unsustainable even for those on decent incomes.

I'm in the incredibly fortunate position that I can continue absorbing these price rises but I'm starting to notice it myself. It's going to be a very difficult winter for the vast majority of people.

I am the same - I can absorb these increases for now but I am incredibly worried for friends and family who will struggle, even those who have decent jobs. The £150 council tax rebate and £200 electricity bill credit don't touch the sides.

 

[duncanp]

News out today saying the price cap is expected to increase by another £900 in October this year.

Energy price cap: Typical energy bill set to rise by £800 a year in October

Industry regulator Ofgem warns households that they should expect higher energy bills this winter.

www.bbc.co.uk

This really cannot continue like this any more. People are literally going to freeze, starve or both this winter. It's fast becoming unsustainable even for those on decent incomes.

I'm in the incredibly fortunate position that I can continue absorbing these price rises but I'm starting to notice it myself. It's going to be a very difficult winter for the vast majority of people.

I can (just about) absorb another 40% rise in October, but not another increase after that.

A lot of people will be in a far worse position than me, and the government will have to increase the support it gives to people (ie the £200 credit to people's bills could become £300 or £400, and be converted into a grant rather than a loan) otherwise there will be serious hardship and possibly civil unrest.

Already there are reports of shoplifting at supermarkets going through the roof because people are finding it difficult to put food on the table.

The government will also need to clamp down on energy companies taking the p*** by increasing monthly direct debits by far more than the increase in the energy price cap. I think it is this, just as much as the increase itself, which is causing hardship.

If the situation is not sorted out by the next election, then the Conservatives will lose. (I say this as a Conservative voter) Most people will not care two hoots about lockdown parties, as a lot of people were "flexible" in their interpretation of the COVID rules anyway.

But people do care about the fact that is costs more than £100 to fill up a car with petrol, or that they cannot afford to eat or heat their houses adequately.

 

[Snow1964]

It is always worth remembering that the energy price cap doesn’t cover something like 25% of homes

1) Rural areas away from mains gas
2) Those with oil, logs etc as main heat source
3) Those in flats with communal/centralised heating
4) Many care homes, or sheltered flats with shared facilities
5) Housing Estates where heating is managed as a collective or under a group tariff

But it is going to be very tough for those in poorly insulated homes, and many of these will reach the fuel poverty threshold (defined as 10% of disposable income)

 

[yorksrob]

Aside from the poverty aspect, there's also the effect that withdrawing such a large proportion of people's disposable income will have on the wider economy.

I think there will need to be a windfall tax to address this issue at some stage regardless of the arguments around investment etc

 

[ainsworth74]

The Government will continue to keep their head firmly in the sand. This Governments approach to nearly everything has been "it'll be alright on the night" and then just muddle their way through it. I see no reason to think they won't take the same approach here. Perhaps they'll yet again get away with it and through a mixture of muddling and luck it will indeed be "alright on the night" but personally I think this, along with the price of food, got the potentially to get very very ugly.

and many of these will reach the fuel poverty threshold (defined as 10% of disposable income)

Change the threshold. Job done!

 

[Kite159]

It will be tougher if the coming winter is colder than average.

I suspect there will be some riots at some point.

 

[Baxenden Bank]

It will be tougher if the coming winter is colder than average.

I suspect there will be some riots at some point.

I don't think there will be riots.

There will be however be:

• People 'freezing' themselves into illness and perhaps death. Either directly or through health issues caused by being too cold to function.
• Massive non-payment of bills - which will lead to more people going onto pre-payment meters so they essentially cut themselves off by not having cash for meter credit - rather than being cut off by order of a court [which is a rarety nowadays]. Such debts will of course be passed on to everyone else through future revisions to the price cap.
• A rise in 'low level' crimes - shoplifting as previously mentioned, theft from people / property [as people nick stuff to sell for cash], bypassing of meters.
• A rise in people burning 'free' materials in their homes, even where they have no chimney - pallets, any old rubbish, trees from your local woodland etc.

 

[Howardh]

What makes matters worse is that standing charges will rise again, so those shivering under blankets with everything switched off might still see around £1/day* disappearing from their accounts if they have dual fuel, and there's nothing they can do about it. if they put them up by 40%.

I can now see civil disobedience on a scale larger than the Poll Tax Riots, if nothing (much) is done by the government. Parents who can't heat or feed their children properly? People who see their own elderly parents shivering to death? That's when it strikes home.

Oh, it's OK though, the energy companies are raking it in and the government are happily banking the 5% VAT thank you very much.

*My standing charges are currently appx 45p and 25p (70p) so a 40% rise is near enough a quid/day.

 

[DarloRich]

£2800 - chuff and indeed blime!

BTW - the standing charge s an absolute killer. I bet that goes up again.

 

[66701GBRF]

...and to think, OFGEM want to allow cap changes 4 times a year.

 

[Bletchleyite]

...and to think, OFGEM want to allow cap changes 4 times a year.

The cap is utterly pointless; all it does is creates big jumps and it caused a number of suppliers to collapse entirely. It should be abolished.

What we should be doing is:
1. Funding 100% of the cost of the insulation of ALL properties up to a rating of at least C, ideally better, and mandating all rental properties, both social and private, to be improved to B or A within 12 months or before any new tenant rental contract is signed, whichever comes first. That way you need less energy in the first place. DIY installation should be included in this funding as some will find it preferable to go that way, and the Building Regs part of it eased. Funding from general taxation; increase if necessary.
2. When an application has been made for (1) or for tenants (private and Council), temporary funding should be provided to keep home heating and cooking affordable as an interim thing.
3. Relaxation of conservation area/listed building regulations where the changes being made are confirmed by an independent surveyor as required to improve energy efficiency. For example, there are too many houses in London with traditional single glazed sashes. Sticking uPVC in looks rubbish, but replacement double or triple glazed sashes or secondary glazing should receive consent by default.

Energy will not, and should not, get cheaper long term. We need to adapt to use less.

 

[kristiang85]

That's insane. That's more than a month of my take-home pay, and I'm paid well above the national average (although obviously I do share costs with my wife, but many do live on their own).

I can absorb it for a while which is lucky for me, but even this winter I was never putting the heating on during the day whilst working at home to not bring the costs up too much.

Heaven knows how those on low and even average incomes are going to cope with the next year, especially given the food cost increases too.

 

[najaB]

What we should be doing is...

I'd add a 4th point - prioritising the move away from fossil fuels in our energy mix. An increase in the amount of renewables and new nuclear needed to happen years ago, and is even more important now.

 

[Pete_uk]

Renewables are unreliable and nuclear takes a decade to build a conventional station. Maybe the Rolls Royce small reactors can be built and deployed quicker. The Chernobyl melt down set us back nearly 30 years in terms of development.

As for what can be done in the mean time? Hope global warming gives us another mild winter.

 

[philthetube]

The cap is utterly pointless; all it does is creates big jumps and it caused a number of suppliers to collapse entirely. It should be abolished.

What we should be doing is:
1. Funding 100% of the cost of the insulation of ALL properties up to a rating of at least C, ideally better, and mandating all rental properties, both social and private, to be improved to B or A within 12 months or before any new tenant rental contract is signed, whichever comes first. That way you need less energy in the first place. DIY installation should be included in this funding as some will find it preferable to go that way, and the Building Regs part of it eased. Funding from general taxation; increase if necessary.
2. When an application has been made for (1) or for tenants (private and Council), temporary funding should be provided to keep home heating and cooking affordable as an interim thing.
3. Relaxation of conservation area/listed building regulations where the changes being made are confirmed by an independent surveyor as required to improve energy efficiency. For example, there are too many houses in London with traditional single glazed sashes. Sticking uPVC in looks rubbish, but replacement double or triple glazed sashes or secondary glazing should receive consent by default.

Energy will not, and should not, get cheaper long term. We need to adapt to use less.

Agree that all this should be done, but don't think it is conceivable within you timescales, purely from a manpower viewpoint, the rows and rows of Victorian terraced houses in the north will require huge amounts of work

 

[DelayRepay]

Agree that all this should be done, but don't think it is conceivable within you timescales, purely from a manpower viewpoint, the rows and rows of Victorian terraced houses in the north will require huge amounts of work

I agree it's ambitious, and it won't solve our problems for next winter. But the sooner we start, the sooner we'll make progress.

 

[Silver Cobra]

Seeing this latest news article regarding the energy price cap makes me very glad that my household signed up to a fixed-rate 24 month deal with Octopus Energy last October, which works out to around £1500 per year. Granted, when October 2023 gets here, unless some sort of miracle happens that drives down the energy prices, it's probably going to come as quite a nasty shock to me as I'd be coughing up around 15-20% of my annual income just for energy bills.

 

[Snow1964]

Isn’t there already a commitment that new tenancies have to be energy C (but does not apply until 2025, and not until 2028 for existing tenancies.)

I think there is also something coming to do with new mortgages, where the bank is obliged to have a minimum average (so can lend against poorly insulated house, but needs good one to average it. This could bite those in poorly insulated houses looking to remortgage.

The danger of bringing rules forward, is by forcing insulation, get a situation where some homes left empty pending upgrades, so renters won’t be able to find a home, which rather makes the energy cost of the home they haven’t got a worse alternative

 

[cactustwirly]

Agree that all this should be done, but don't think it is conceivable within you timescales, purely from a manpower viewpoint, the rows and rows of Victorian terraced houses in the north will require huge amounts of work

Not just the north, there are loads of terraces in the south

 

[fourtytwo]

What I dislike the most about this is that Quangos such as Ofgem and many others (Ofcom etc) seem entirely unaccountable to parliament and therefore the electorate. Who for example decided to load the standing charge with so much junk, who decided to bail out a company directly at the tax payers expense whilst allowing the majority to go to the wall etc etc. I heard the so called CEO of Ofgem on the radio recently proudly announcing they had rooms full of in his words "bean counters" doing amazing maths, well in my long experience in industry an excess of "bean counters" is often at the root of company failures.

 

[brad465]

I don't think there will be riots.

There will be however be:

• People 'freezing' themselves into illness and perhaps death. Either directly or through health issues caused by being too cold to function.
• Massive non-payment of bills - which will lead to more people going onto pre-payment meters so they essentially cut themselves off by not having cash for meter credit - rather than being cut off by order of a court [which is a rarety nowadays]. Such debts will of course be passed on to everyone else through future revisions to the price cap.
• A rise in 'low level' crimes - shoplifting as previously mentioned, theft from people / property [as people nick stuff to sell for cash], bypassing of meters.
• A rise in people burning 'free' materials in their homes, even where they have no chimney - pallets, any old rubbish, trees from your local woodland etc.

I wouldn't be surprised if the only thing stopping riots is that would-be rioters can't afford the resources needed to make riot gear (like Molotov's).

 

[Mikw]

I wouldn't be surprised if the only thing stopping riots is that would-be rioters can't afford the resources needed to make riot gear (like Molotov's).

Also don't forget they've massively ramped up the jail sentences for protests the home secretary sees as "causing an annoyance".

 

[Bletchleyite]

There won't be massive riots, just like there weren't over COVID. There does seem to be a view on here that people will riot about all sorts. People aren't happy, but most understand it's not actually the Government's fault, it's more the global geopolitical situation that's the problem.

 

[brad465]

There won't be massive riots, just like there weren't over COVID. There does seem to be a view on here that people will riot about all sorts. People aren't happy, but most understand it's not actually the Government's fault, it's more the global geopolitical situation that's the problem.

But they also understand that the Government have to do at least a certain amount to alleviate the situation, whether it's financial support for the hardest hit, more onshoring of manufacturing and working towards ensuring sufficient pay rises are provided (something our "illustrious" BoE Governor has said we should avoid), among other options.

The reality here is the whole world system right now is a means to an end, and radical change is necessary to solve it. There are several things I can think of that need to make up that solution, but the problem we have is many think radical change is a bad idea and/or can't see into the future enough to realise it's necessary.

 

[Bletchleyite]

But they also understand that the Government have to do at least a certain amount to alleviate the situation, whether it's financial support for the hardest hit, more onshoring of manufacturing and working towards ensuring sufficient pay rises are provided (something our "illustrious" BoE Governor has said we should avoid), among other options.

If everyone gets a pay rise, their products/services go up and so you have more inflation. The BoE Governor is right - it is an awkward thing to manage.

The reality here is the whole world system right now is a means to an end, and radical change is necessary to solve it. There are several things I can think of that need to make up that solution, but the problem we have is many think radical change is a bad idea and/or can't see into the future enough to realise it's necessary.

We certainly need a radical change to how we generate and use energy, in particular a move away from oil and to nuclear and renewables, but also a massive drop in consumption. I don't agree for instance with Insulate Britain's methods, but their message is absolutely bang-on. Energy shouldn't get cheaper, we should just use less of it, and that's where I see Government assistance being of most benefit.

We could do with getting rid of the Tories (in my view, not everyone's), or at least this specific, rather self-serving and corrupt version of them, in favour of a more progressive social democrat type Government.

But should we totally change the system? I wouldn't say so. There's no such thing as a perfect system, and this one is certainly better than some.

 

[Yew]

We certainly need a radical change to how we generate and use energy, in particular a move away from oil and to nuclear and renewables, but also a massive drop in consumption.

Whilst I completely agree, unfortunately that'll be difficult to do before October. The French haven't seen such drastic rises though.

I don't agree for instance with Insulate Britain's methods, but their message is absolutely bang-on.

Exactly, insulation isn't sexy, but it's incredibly effective. We also need a real solution for those who are renting, why would a landlord pay to cut your bills?

 

[Bletchleyite]

Whilst I completely agree, unfortunately that'll be difficult to do before October.

Indeed, there will also need to be something interim.

The French haven't seen such drastic rises though.

That'll be partly because pretty much all their electricity is nuclear and generated domestically. We need to do the same.

Exactly, insulation isn't sexy, but it's incredibly effective. We also need a real solution for those who are renting, why would a landlord pay to cut your bills?

Indeed, private rented properties are probably the worst - it will need to be a combination of grants and forcing landlords to do it by law.

 

[duncanp]

The French haven't seen such drastic rises though.

One reason for this is that the French government has arranged for Electricite De France to borrow money so that the increase in bills is lower.

All very well, but the money has to be paid back at some point.

If there were two 40% increases in energy prices within a year in France people would be out on the streets protesting.

 

[najaB]

People aren't happy, but most understand it's not actually the Government's fault, it's more the global geopolitical situation that's the problem.

No. This is largely a government problem, there is a lot they could do to help but are choosing not to. For example, one reason given for Brexit was so they could cut VAT on electricity bills - but now they refuse to cut VAT on electricity bills.

One reason for this is that the French government has arranged for Electricite De France to borrow money so that the increase in bills is lower.

All very well, but the money has to be paid back at some point.

It will be a lot cheaper for EDF to pay back one massive loan at the interest rate they will be able to negotiate, than it will be for the any consumers who have to depend on credit to pay their bills at the rates they can.