Energy price rises and price cap discussion.

[ChrisC]

I think that's what my supplier is doing. They've also told me that my current Direct Debit is too high - but I do have about £500 of credit on my account built up over the summer so that's maybe why.

I've reduced my DD as suggested, but I've set up a separate savings account and I'm putting the difference in there. I'll also put the £66 credits in there. Then if I find myself going into arrears, I can use the savings to pay off the balance. If not I will have a nice sum saved by the Spring.

Eon increased my DD at the beginning of this year from £94 a month to £149. Now at the end of the summer I have around £600 of credit on my account. Hopefully going into the winter with that amount of credit and the the £66 payments from the government my DD should not need to be increased any further this winter. Fortunately, even if that isn’t enough to take me through the winter I can afford to pay but it has made me look at different ways that I can cut down on the amount of energy I use without being cold this winter. The amount of gas that I have used during the summer has been lower this year. I have cut down by half how much time I heat the hot water and have not really noticed much difference in the temperature of the water. A slightly cooler shower in the evening is the only difference I have noticed.

 

[Trainbike46]

What methodology is used to determine an "average" household?

A set number of units of gas and electricity is considered average. This number must be published somewhere, but I haven't been able to find it. There's also a reasonable chance it no longer matches the average consumption, because of changes in consumption over the years

 

[DelayRepay]

A set number of units of gas and electricity is considered average. This number must be published somewhere, but I haven't been able to find it. There's also a reasonable chance it no longer matches the average consumption, because of changes in consumption over the years

The values shown in the text above include VAT and are expressed for the current Typical Domestic Consumption Values (TDCV) of 2,900kWh of electricity, 12,000kWh of gas, and 4,200kWh of electricity for Economy 7

From: https://www.ofgem.gov.uk/publications/price-cap-increase-ps693-april

I read somewhere that OFGEM update the TDCV occasionally to reflect changes in usage. I also read that it's based on the median household which I guess means there is probably not a single household in Britain that uses that exact amount of energy.

Eon increased my DD at the beginning of this year from £94 a month to £149. Now at the end of the summer I have around £600 of credit on my account. Hopefully going into the winter with that amount of credit and the the £66 payments from the government my DD should not need to be increased any further this winter. Fortunately, even if that isn’t enough to take me through the winter I can afford to pay but it has made me look at different ways that I can cut down on the amount of energy I use without being cold this winter. The amount of gas that I have used during the summer has been lower this year. I have cut down by half how much time I heat the hot water and have not really noticed much difference in the temperature of the water. A slightly cooler shower in the evening is the only difference I have noticed.

I'm in a similar position - I could afford to pay the higher prices, but I would rather not! So like you I've been looking for ways to cut back. My usage this summer was lower than last as a result of things like cooler/shorter showers. And over the last few days despite the evenings being chilly, I have put a fleece on rather than using the heating.

I know I am lucky that my energy saving actions are due to a desire to save money, rather than being absolutely essential. And I know that I can put the heating on if I want to... not everyone is as fortunate.

 

[Dai Corner]

Another thing that irritates me is Martin Lewis. Hitherto I've respected his advice, but when prices started going up last year I grabbed the best fixed-rate deal I could. At the time it was rather more expensive than what I had been paying, but my exit fee is only £15. If prices suddenly drop (unlikely) I can leave the deal I currently have, knowing that I've saved a damn sight more than £15.

This ^

On the very day Russia invaded Ukraine I was offered, and accepted, a fixed price tariff very slightly above the April cap with no exit penalty. It was a no-brainer for me but those who took Martin Lewis' advice to rely on the cap would have lost £thousands if we hadn't had a new Government and new policy.

I'm also irritated that I'll be paying back the Government borrowing through future taxation but won't get a discount off my energy prices.

 

[jon0844]

How that works depends on the supplier. Some are reducing the Direct Debit by £66, but some are leaving the DD at its original amount and paying the $66 back as a credit to the customer's bank account. The later seems an odd approach but I guess it's down to how easily they can change their systems. The net result is the same of course.

Important to remember that the £2,500 is not really a cap. It's what the 'average' household will pay under the new prices. I mention this because I have seen a couple of people elsewhere assume their annual bill will not be more than £2.5k regardless of how much energy they use.

I am managing my usage quite well, monitoring daily spend on electric and gas (and looking at the impact of the gas now the heating has been on a bit this week). I will be below my current monthly payments until it gets really cold, and I'm also in credit quite a bit right now (around £200, after my latest bill). For two months in a row I've overridden the 'suggested' direct debit increase Shell has notified me of (and if I don't do anything will automatically happen). I have to keep going in to adjust my payment back to what I want it to be - or else I'll be caught out.

I'd imagine they can quite easily reduce people's debits with this Government money, but have clearly opted to sit on that money and let some people be in even more credit - and paying more than they have to. I am not sure what Shell intends to do, but think I saw something on their website that suggests it will be a credit on the account - so I guess that means I will need to adjust the debit again.

People do need to keep a closer eye on their spending.. and on Facebook there are still many people who actively refuse a smart meter and claim they know what power they're consuming so don't need one. Others are, as you say, of the opinion that their usage is simply what they pay per month - so they seem unaware that the bills vary based on what you use, not the £100, 200, £300 or whatever you pay. And all this damn talk about price caps and a figure based on some arbitrary household scenario really does not help one bit.

People are getting told their debit is going up by £50 or £100 per month and they're assuming that's the new rate of energy. They're totally clueless about the fact that your debit is NOT your usage! If you think that, you risk either ending up with the energy company ending up with a huge credit (they assume a certain increase in the autumn regardless of your usage now) or a big debt because you get carried away and think 'no problem - I can't go over the cap'.

I really, really wish more people - even Martin Lewis - would spend some time explaining this because I don't think we can fully appreciate just how much people don't understand. Even before this energy crisis, people changed provider based on what they were told they'd pay each month - not what the service charge and unit charges were.

I've already seen people elsewhere comment that there's no need to cut back on energy usage now they know their bill is capped at £2.5k.

I work for a bank - if we said mortgages were capped at £1,000 a month when we actually meant the average customer pays £1,000 a month, we'd rightly have the Financial Conduct Authority on the phone to our Compliance department within minutes! It amazes me that a regulator and the government are using such misleading language.

It's quite terrifying. Some people are simply not doing anything to reduce their usage because they seem to be of the opinion that their bill is like council tax - and isn't linked to actual usage. It seems crazy that people might actually think that, but social media is proof that an AWFUL lot of people think it.

Okay, so maybe there's a case for some sort of average figures based on specific household examples - but, you absolutely must also show the service charges and unit costs as well. Then, explain clearly what they mean.

It seems energy companies are also quite clever in making this data quite hard to view on your account. Sure, it will be on your bill, and within some sub-menus on your account page - but it does seem like everyone tries to avoid talking about the most important thing.

It's a bit like mobile networks that will show the free data/text/call allowances on a tariff but try very hard to hide the out-of-bundle charges, service charges and other fees.

 

[JamesT]

This ^

On the very day Russia invaded Ukraine I was offered, and accepted, a fixed price tariff very slightly above the April cap with no exit penalty. It was a no-brainer for me but those who took Martin Lewis' advice to rely on the cap would have lost £thousands if we hadn't had a new Government and new policy.

I'm also irritated that I'll be paying back the Government borrowing through future taxation but won't get a discount off my energy prices.

I thought Martin Lewis was advising people to go for fixed deals if they could find any that weren’t higher than the expected future level of the cap?

 

[Trainbike46]

I thought Martin Lewis was advising people to go for fixed deals if they could find any that weren’t higher than the expected future level of the cap?

That is what I think his website said. It also includes explainers stating that the cap is not an overall cap, and keeps suggesting looking to reduce energy use to reduce bills. Unfortunately, a lot of media report parts of what the guy actually said, contributing to incorrect assumptions by many people

 

[DelayRepay]

It's a bit like mobile networks that will show the free data/text/call allowances on a tariff but try very hard to hide the out-of-bundle charges, service charges and other fees.

This comparison is interesting, because leaving aside out of bundle charges, most people choose a mobile tariff based on the amount of data they expect to consume. Provided you pick a suitable tariff, you effectively pay a fixed amount each month, and most providers send messages to warn you if you're close to your cap. I wonder if people genuinely think energy bills work the same way.

When I explained all of this to a lad in his early 20s who'd just moved out of his parents house and didn't understand why his electricity direct debit had gone up, he said he thought it worked the same way as his phone contract. Because until he moved out that was the only monthly bill he was responsible for.

That is what I think his website said. It also includes explainers stating that the cap is not an overall cap, and keeps suggesting looking to reduce energy use to reduce bills. Unfortunately, a lot of media report parts of what the guy actually said, contributing to incorrect assumptions by many people

Indeed - the advice on his website was quite clear. The problem is it was translated into 'Martin Lewis says don't fix' by other media outlets.

The other problem was that he couldn't give generic advice - most suppliers were only offering fixes to existing customers, so whether fixing was right or not depended on what the customer was being offered. It also depended on how much the customer valued certainty.

 

[Dai Corner]

I thought Martin Lewis was advising people to go for fixed deals if they could find any that weren’t higher than the expected future level of the cap?

That is what I think his website said. It also includes explainers stating that the cap is not an overall cap, and keeps suggesting looking to reduce energy use to reduce bills. Unfortunately, a lot of media report parts of what the guy actually said, contributing to incorrect assumptions by many people

From The Sun 4 February

The cap will jump by 54% from April 1 and the best fixed tariff available at the moment will still be more expensive than the new, higher level.

That means most consumers should stay on their supplier's standard variable tarriff, which is protected by the price cap.

 

[GusB]

The mechanics of energy bills really need to be taught in schools (as do other "home economic" issues). I have to be honest in that I've only really been exposed to the reality of it all fairly recently because I'd always been in a house share situation where I wasn't directly responsible for paying the bill. That and working in the complaints team for one of the Big Six...!

I've heard so many grumbles about suppliers being in breach of contract because a direct debit has gone up after a review and if I had a quid for every time I've had to explain it, I'd be on a beach in the Carribbean sipping my favourite cocktail. That doesn't change the fact that energy suppliers do not do enough to explain exactly how it works. OfGEM also needs some serious reform too.

 

[najaB]

The mechanics of energy bills really need to be taught in schools (as do other "home economic" issues). I have to be honest in that I've only really been exposed to the reality of it all fairly recently because I'd always been in a house share situation where I wasn't directly responsible for paying the bill.

We were taught how to read electricity meters in school (the old-school type with independent dials for each digit). That was 30+ years ago though.

 

[Howardh]

My energy price is due to rise by £150 pounds a month I thought they had capped energy and a grant? Is anybody else having to fork out alot more here?

OVO lifted mine from £110 to £142/month, and then whent he new cap announcement came, they reduced it back to £110. I still have credit of over £900 which they probably noted, and also the £400 bonus which will be added in stages. Hoping that £1960 will see me throught the winter, but when next winter arrives that £900 credit will have gone and will need finding from somewhere; or maybe prices will be lower then?

 

[Essan]

I am not sure what Shell intends to do, but think I saw something on their website that suggests it will be a credit on the account - so I guess that means I will need to adjust the debit again.

I am also with Shell - they are going to reduce the amount they take on your DD by the Govt grant. So, if you currently pay £100 a month, then in October they will only take £34.

 

[DelayRepay]

OVO lifted mine from £110 to £142/month, and then whent he new cap announcement came, they reduced it back to £110. I still have credit of over £900 which they probably noted, and also the £400 bonus which will be added in stages. Hoping that £1960 will see me throught the winter, but when next winter arrives that £900 credit will have gone and will need finding from somewhere; or maybe prices will be lower then?

At least next winter they won't be any higher due to the Government intervention. Even if wholesale prices fall, I doubt they'll fall below the government guarantee level so we won't see any benefit.

You should build some credit back over the Summer, but yes it won't be £900. And personally I think the £400 is unlikely to be repeated. But next winter is a long way away - we could plausibly have a different government by then, and Putin's war could be over. So I guess all we can do is get through this winter, try to reduce energy consumption and put as much away over the summer to see us through the colder months.

We were taught how to read electricity meters in school (the old-school type with independent dials for each digit). That was 30+ years ago though.

I vaguely remember being taught what kWhs were, and how to work out how much power a device uses. I don't remember being taught anything about budgeting or managing money really. I think the closest was costing up meal plans in Home Economics.

I am also with Shell - they are going to reduce the amount they take on your DD by the Govt grant. So, if you currently pay £100 a month, then in October they will only take £34.

But presumably at the same time your £100 DD will increase due to the higher prices from 1 October. Wo you won't actually be £66 per month better off.

 

[Essan]

But presumably at the same time your £100 DD will increase due to the higher prices from 1 October. Wo you won't actually be £66 per month better off.

Yes, if as a result of the price increase my DD needs to go up from £100 to £120 a month, for example, then in actuallity it will become £54 a month (£54+£66=£120). Still means I will be paying a lot less than the current £100.

Edit to add: of course, if my energy consumption is more than £120 a month over the winter, then I will probably need to increase my DD still further .... The figures I've used are on the assumption that £100 per month covers anticipated annual use at current costs (which, in my personal case, it does)

 

[jon0844]

Just had this from Shell in the last ten minutes:

The Government has launched the Energy Price Guarantee to help households with rising energy costs. Here’s what it means for you and your bills.

The Energy Price Guarantee limits how much you’ll pay for each unit of gas and electricity you use. It means that the average household paying by Direct Debit, with typical energy use, will pay £2,500 a year for their energy. This will save the average house £1,000 a year, while the average flat saves £700.*

Remember, it’s the unit price of your energy that’s capped, not your overall bill, so the more energy you use, the more you’ll pay.

While the Energy Price Guarantee protects you from the very large price increases – driven by extremely high global energy costs – you’ll still see an increase from your current rates.

On Saturday 1 October 2022, your new rates, as set out by the Energy Price Guarantee, come into effect. These form your flexible tariff, referred to as Energy Price Guarantee Direct Debit.
Find out more

How this affects your energy prices

Your electricity rates are changing from 29.239p to 35.056p per kWh and your standing charge per day is changing from 37.92p to 38.93p.
Your gas rates are changing from 7.344p to 10.309p per kWh and your standing charge per day is changing from 27.22p to 28.48p.

Annual Personal Projection

Your current tariff: Flexible 7 Direct Debit ebill £2,502
Your new tariff: Energy Price Guarantee Direct Debit £3,182

Increase in cost £680

Your rates and projections are outlined above. These include 5% VAT and are what we estimate you’ll pay over the next 12 months. This is based on your estimated energy consumption of 4,035 kWh of electricity and 14,767 kWh of gas and does not take into account any credit or debit balances you may have.

How much you pay will depend on how much energy you use. This projection also doesn’t include government schemes to reduce the amount you’ll pay, such as the Energy Bills Support Scheme.
You can find the terms and conditions for your old tariff, or see those for your new rates.

 

[Xenophon PCDGS]

The daily standing charges for both gas and electricity have not been increased by the same amounts that were forecast by some "experts" a few weeks ago.

 

[jon0844]

The daily standing charges for both gas and electricity have not been increased by the same amounts that were forecast by some "experts" a few weeks ago.

Is that because of removing payments for green projects? I mean, the future is fracking it seems.

Reading today that green energy generation is now nine times cheaper. Imagine if we put some of that Government money towards more solar, wind and tidal energy. Then we'd need less gas and in the future, the vision is (was?) to reduce the use of gas in homes also.

 

[Citybreak1]

Just had this from Shell in the last ten minutes:

Yes I had a similar email mines has gone up a little less but still a lot £85 to £256

 

[jon0844]

Yes I had a similar email mines has gone up a little less but still a lot £85 to £256

I'm ignoring their estimates as I'm using less energy now, and the spikes in July and a bit of August that may have triggered their desire to increase my monthly payments was down to the cost of air conditioning - something I'm not likely to use again until next summer.

The only relevant data is the unit cost for electricity and gas, plus service charge.

 

[Russel]

I've already seen people elsewhere comment that there's no need to cut back on energy usage now they know their bill is capped at £2.5k.

This is part of a wider problem in the UK, far too many people are blind when it comes to how finance.

I joined the Facebook group "Energy Support And Advice UK" earlier this year after seeing it mentioned in a few places and the amount of false information being passed around is shocking to the point where I've wondered if it's a parody group. Sadly, this is where a lot of people are going for "advice" on energy bills... I did try to join in with some useful answers to queries in the group but soon realised any genuinely useful posts get lost in a sea of rubbish.

 

[skyhigh]

The daily standing charges for both gas and electricity have not been increased by the same amounts that were forecast by some "experts" a few weeks ago.

"A few weeks ago" being before the new artificially low cap was introduced? Of course they haven't gone up as much as feared now that's in place...

 

[Xenophon PCDGS]

"A few weeks ago" being before the new artificially low cap was introduced? Of course they haven't gone up as much as feared now that's in place...

I hope that you do not think such a decision was wrong. Any amount saved at present is worthwhile. The word "artificially" can also have been applied to the financial experts and their threats of circa £6,500 that were bandied about not so many weeks ago.

 

[skyhigh]

I hope that you do not think such a decision was wrong.

No, not in the slightest. The use of the quote marks around the word "experts" made me think you were suggesting the people who predicted the forthcoming standing/unit charges were wrong - they were fairly realistic until the Government stepped in.

The word "artificially" can also have been applied to the financial experts and their threats of circa £6,500 that were bandied about not so many weeks ago.

If the Government hadn't stepped in, I think that wouldn't have been far off in the terms of the next 2 years. We will be paying through tax - that higher figure isn't just magicked away.

 

[Xenophon PCDGS]

If the Government hadn't stepped in, I think that wouldn't have been far off in the terms of the next 2 years. We will be paying through tax - that higher figure isn't just magicked away.

Can you clarify the mention of tax above, as recent Governmental statements about taxation would appear less coming into the coffers of the Treasury in the next period leading up to the next General Election. There is also the not unsubstantial National Debt interest that has to be paid, which is now at a higher interest rate.

 

[birchesgreen]

This is part of a wider problem in the UK, far too many people are blind when it comes to how finance.

I joined the Facebook group "Energy Support And Advice UK" earlier this year after seeing it mentioned in a few places and the amount of false information being passed around is shocking to the point where I've wondered if it's a parody group. Sadly, this is where a lot of people are going for "advice" on energy bills... I did try to join in with some useful answers to queries in the group but soon realised any genuinely useful posts get lost in a sea of rubbish.

What kinds of things?

 

[Russel]

What kinds of things?

Most memorable was probably when cancelling direct debits was trending a month or two ago because the Energy companies couldn't possibly go after everyone that did it, to me this is simply burying ones head in the sand.

Some of the energy saving tips are questionable too...

• "Boil a full kettle in the morning put it in a flask for later in the day." No, you're still boiling the same volume of water, the savings will be minute at best.
• "Don't put the 'big' light on, buy LED, battery powered stick on lights instead." Again, no, LED bulbs cost very little to run, much less than buying new batteries every few days.
• "Do your washing over night when energy is cheaper" The number of times I've seen this one is shocking, this only works if you're on an economy 7 tariff.

 

[birchesgreen]

"Boil a full kettle in the morning put it in a flask for later in the day." No, you're still boiling the same volume of water, the savings will be minute at best.

 

[WelshBluebird]

• "Boil a full kettle in the morning put it in a flask for later in the day." No, you're still boiling the same volume of water, the savings will be minute at best.

I suspect the initial starting point of that is a lot of people (myself included) are pretty bad at filling the kettle with way more water than what we actually need at that time. So by boiling it multiple times during the day you waste a fair bit, whereas if you only boil it once you only waste what you don't use from the single boil. Though if that is the case the advice should be to just boil the amount you actually need (and you'll get your tea / coffee quicker then too!).

 

[DelayRepay]

I suspect the initial starting point of that is a lot of people (myself included) are pretty bad at filling the kettle with way more water than what we actually need at that time. So by boiling it multiple times during the day you waste a fair bit, whereas if you only boil it once you only waste what you don't use from the single boil. Though if that is the case the advice should be to just boil the amount you actually need (and you'll get your tea / coffee quicker then too!).

Also makes sense if you're on economy 7 and get up while the night rate's still active.