Ofgem’s latest energy price cap has taken effect, increasing energy costs by 2% for millions of households across England, Wales, and Scotland. The change brings the total energy bill for an average home to £1,755 per year. That’s a whopping £35 above the previous cap! This new cap will be in place from October through December 2023.
Beyond the story of these recent changes is a more troubling macro trend in energy pricing. In January 2022, the average household on a price-capped dual-fuel tariff was £1,216. This figure is based on the energy price cap for people on direct debit payments. In January 2023, this amount jumped to an alarming £4,059. The Energy Price Guarantee meant bills were capped at £2,380 from October 2022 to June 2023, helping consumers. With the ongoing winter, most households are looking at another tough winter with relatively high energy costs.
Latest reports by industry trade bodies have shone an alarmingly bright spotlight on the extent of the fuel poverty crisis. They suggest removing the fuel poverty gap with an investment of £1.5 billion annually. These improvements would enable families currently living in fuel poverty to save on average £400 each year. Campaigners are calling for urgent action as thousands of families are expecting to face a huge cost just before the weather turns cold.
Days after the implementation of the cap, the government made headlines by declaring that it is taking “‘new urgent action‘” to help struggling families this winter. Energy Minister Martin McCluskey commented on his government’s commitment to finding solutions to the growing energy burden.
“In the coming weeks, we will be announcing details of the biggest home upgrade programme in British history to improve up to five million homes, making them cheaper and cleaner to run.” – Martin McCluskey
The government increased eligibility to the winter fuel payment scheme. Nine million pensioners in England and Wales are entitled to means-tested benefits. This is really important for anyone earning £35,000 a year or less. The government had already tried to cut the winter fuel payment, which led to a huge public backlash. Faced with furious backlash, they quickly backtracked on their policy.
It is straightforward for households to calculate their total energy costs impact. Simply add inflation of around £2 for every £100 they paid for energy in the previous year. It is a very welcome and practical measure designed to give families a clearer picture of the financial impact of the new price cap.
Energy suppliers are struggling under extreme financial pressures. According to recent government statistics, consumers are in debt to these companies to the tune of £4.4 billion—the highest ever recorded. This increasing debt is a symptom of the current crisis many households experience in making ends meet, especially when it comes to their energy costs.
Ned Hammond, a representative from a prominent campaign group, emphasized the inadequacy of current support measures for those in need.
“The level of support [is] still insufficient for those that need it most.” – Ned Hammond
With winter just around the corner, skyrocketing energy costs are an emergency for millions of impacted households. In parallel, government support programs are indispensable lifelines that allow families to afford such high costs. The upcoming home upgrade program and expanded winter fuel payments aim to alleviate some of the financial pressure faced by families during this challenging period.
