National Energy Action comments on Ofgem changes to GB Energy Price Cap

National Energy Action director of policy and advocacy Peter Smith says: “Despite households being shielded from the full extent of price rises due to the UK Government’s Energy Price Guarantee, there has been a big increase depending on how households pay for their fuel bills. If you pay by cheque or cash, you will pay £254 more than Direct Debit customers and £80 more if you are on prepayment meter next quarter. In total these customers will be paying over £1.1 billion per year more from January – an increase of more than £200 million compared to the last cap period – despite these customers often living on lower or fixed incomes. These differences add up and have a big impact for those struggling to pay their bills and are not cancelled out by the UK Government’s Energy Price Guarantee. People shouldn’t be punished because of how they pay their bills. Many have little or no choice. Unless the Government steps in, unfair differentials on this scale will persist.

“The UK Government’s Energy Price Guarantee means that ‘average bills’ will continue to be set at £2,500 in the three months from January to the end of March next year, but the Ofgem announcement could still have a big impact on struggling consumers because of where people live and how they pay for their energy bills.

“The Energy Price Guarantee only limits the unit rate households pay and not standing charges which can still massively vary depending on where you live across Great Britain. These have been growing in recent years and how much Ofgem allow companies to pass through to customers through these fixed charges will have a big impact, especially for households who have to pay by prepayment or more generally, depending on how you pay for your bills.

“Customers who pay by standard credit (cash or cheque) are also currently paying an additional £215 per year more compared to direct debit customers. Prepayment meter customers are also paying an additional £59 compared to those on Direct Debit. These differences add up and have a big impact for those struggling to pay their bills. They too aren’t currently cancelled out by the UK Government’s Energy Price Guarantee and, unless the Government steps in, differentials on this scale will persist through the next quarter.

“Finally, as taxpayers, we all have a keen interest in making sure Ofgem keeps the cap as low as possible in this period. We are hoping that some of the increased costs Ofgem were looking to pass straight through to customers before the Energy Price Guarantee was announced will have been reconsidered.”

National Energy Action recently warned that after April average energy bills will increase by 40% from current record levels, given that the Government will cease the support currently provided by the Energy Bills Support Scheme and the changes they will make to the Energy Price Guarantee (£2,100 currently to £3,000 in April 2023). National Energy Action also warned that although there will be a welcome increase to welfare payments and further targeted support via Cost-of-Living Payments, there would likely continue to be big gaps in support, especially for low-income households not on means-tested benefits.

ENDS

Notes to editors

1. National Energy Action (NEA) works across England, Wales and Northern Ireland to ensure that everyone in the UK can afford to live in a warm, safe home. For more information visit https://www.nea.org.uk/.
2. NEA’s response to Financial Statement can be found here: https://twitter.com/NEA_UKCharity/status/1593237519650332672
3. Ofgem’s updated Price Cap level is expected to be announced at 7.30 am on 24th November here: https://www.ofgem.gov.uk/news-and-views