An energy price “disaster” is looming

Ofgem has confirmed a staggering 54% rise on the energy price cap from April 2022, lurching from £1277 set in October 2021 to £1971.

The energy price cap was introduced in 2019, to set the top figure that those on dual-fuel rates could be charged for typical yearly usage of gas and electricity. With an average of £695 in energy price hikes for the 22 million households on a variable rate, and huge rises for those coming to the end of their fixed deals, there are few who won’t feel the pinch and even more gravely concerned about their ability to pay their bills.

The energy cap price increase comes in the wake of record gas energy market prices caused by the global supply crisis. The cost of gas has risen four-fold within a year. The Government is stepping in to lessen the impact by introducing a raft of measures to cut bills, including:

  • All domestic electricity customers in England, Scotland and Wales will gain a £200 discount on their bills in October 2022, which will be repayable. The discount will automatically be repaid in equal £40 payments over five years.
  • The Government will provide £150m to aid energy customers in Northern Ireland.
  • In April 2022, households in England in Council Tax bands A-D will receive a £150 tax rebate. This will not need to be repaid.
  • Discretionary funding of £144 million will also be provided to support vulnerable people and individuals on low incomes that do not pay Council Tax, or that pay Council Tax for properties in Bands E-H.
  • Devolved governments in Scotland, Wales and Northern Ireland are expected to receive around £565 million of Barnett funding as a result of the Council Tax Energy Rebate in England.
  • Eligibility for the Warm Homes Discount will expand by almost a third to benefit three million vulnerable households and will increase from £140 to £150 from October.
  • The government’s plans will provide around 28m households with £350 towards energy bills.
  • There will be no cut on VAT on energy.

The Joseph Rowntree Foundation’s UK Poverty Report said, ‘Households who spend the highest proportion of their budgets on energy are likely to be the ones most affected by the rising energy cap, with already tight budgets further squeezed. Those particularly at risk are families with children, especially lone parents, and those in rented accommodation.’

Estimates before the energy price cap increase in October 2021, put fuel poverty at around 13% of households in England, 25% in Scotland, 12% in Wales and 18% in Northern Ireland. The three primary causes are low incomes, high energy bills and energy inefficient homes.

Kevin Wellman, CEO of the Chartered Institute of Plumbing and Heating Engineering (CIPHE) said: “We are extremely concerned about the impact this will have on households. Even with government help, energy price rises will spell disaster, especially for the most vulnerable.”

There are no official statistics covering fuel poverty for the pandemic period, but estimates predict around 2 million households are already teetering on the edge after the 12% increase in October.

“It’s inevitable they will fall once prices increase in April,” continued Kevin. “This, combined with tax and interest rate rises, soaring food costs and inflation hitting a 30-year high means we are entering the perfect storm. The figures I’ve seen quoted estimate some 6.32 million households in Britain – that’s more than 15 million people – will be living in fuel poverty this year.

“Next winter will be extremely harsh, especially if the estimates come true of further energy price cap rises in October 2022. This will have massive implications on health and knock-on issues such as water poverty, as households are forced to decide between heating and eating. The elderly, disabled and those in rented accommodation are at particular risk, as they are more likely to have inefficient heating systems, in ill insulated properties.

“The current situation highlights not just the inequality around incomes and expenditure but also the grave issues around the state of our housing stock. To help pull families out of fuel poverty we need to make homes, heating and hot water systems as efficient as possible. Our industry will be central to helping consumers make good choices when it comes to both using and upgrading their systems. Whether that’s improving existing efficiencies by fitting controls and TRVs, or replacing old and inefficient boilers with the latest boiler technology or renewables, the installer has an important role to play. Who else is better placed to tell their clients how to get the best from their systems and make them more energy aware?

“With the cost of energy likely to rise further throughout 2022 and beyond, we have to take serious steps to improve the energy efficiency of homes. It’s vital Government measures continue to tackle the fundamental issue of energy use, and don’t just use a sticking plaster of energy bill rebates to help households pay costs.”