Weekly News Review - 25th November 2022
Rise in price cap increases cost of Energy Price Guarantee to £42bn
Ofgem announced on Thursday that the price cap from 1 January to 31 March will increase to £4,279, a rise of £730 from the current level of £3,549. However, under the Energy Price Guarantee (EPG) which began in October, a typical household bill will be limited to £2,500 with the difference subsidised by the Government.
It is important to note that the EPG figure of £2,500 is not a limit on customer bills and if a household’s energy consumption is higher than average then they will pay more than this figure. The cap refers to the unit price for energy that suppliers can charge and is limited to 34p/kWh for electricity and 10.3p/kWh for gas. The new price cap announced by Ofgem would have seen these figures rise to 67p/kWh and 17p/kWh, respectively.
The increase in price cap will double the cost to the Government to £5bn a month with consultancy Cornwall Insight estimating the total scheme cost will increase to £42bn. Principal Consultant Craig Lowrey said: “Our estimate of the full cost of 18 months of the EPG has jumped from approximately £38 billion to £42 billion.”
“Extending the EPG, even at an elevated level, has resulted in the government being exposed to variables and factors over which they crucially have no control. With so many households struggling to pay their bills, it is essential that support is made available, however it is clear that the EPG is not a desirable long-term solution.”
Since becoming chancellor, Jeremy Hunt has announced that the level of EPG support will rise to £3,000 from April which will help to reduce the total scheme cost. The chancellor has also encouraged UK households to reduce their energy consumption by 15% to help lower bills in the long term.
Mr Hunt said: “If people did the 15%, they could save £500 in the amount they pay in the following years. So, we are trying to help people to help themselves. We are giving them cushion this year and next, but we need people to change their behaviour in the long run.”
Tory rebels seek to reverse onshore windfarm ban in England
A growing number of rebel Tory PMs are putting pressure on Rishi Sunak to reverse the ban on onshore windfarms in England. Former cabinet minister Simon Clarke has tabled an amendment signed by around 20 Conservative MPs that would end the de facto ban introduced by David Cameron in 2014.
Among those to have signed the amendment are former prime ministers Liz Truss and Boris Johnson. During her brief time as leader Truss had supported the resumption of onshore wind. However, the backing of Johnson is surprising given his lack of interest to overturn the ban during his three years as prime minister.
Onshore wind is now seen as the cheapest form of electricity generation following the rise in gas prices over the past year. It is also far quicker to build windfarms onshore than offshore. However, since Cameron’s change in planning laws in 2014 it has become much more difficult and time consuming to obtain planning permission.
Following Russia’s invasion of Ukraine there has been a greater urgency to reduce gas imports and improve energy security. Many MPs are now realising that onshore wind offers the most cost effective way to reduce energy bills whilst also helping to meet the UK’s net zero obligations.
Simon Clarke said: “This really is an issue that unites opinion from all wings of the Conservative party. We should let local communities decide whether or not they want onshore wind, perhaps linked to sensible incentives from energy companies, and not apply a blanket ban.”
“Onshore wind can lower our constituents’ bills, boost our energy independence and safeguard our environment, and I am delighted so many colleagues are supporting this important amendment.”
Energy suppliers failing struggling customers, says Ofgem
Energy regulator Ofgem has told UK energy suppliers to improve their support for vulnerable customers, following its third review into the sector. It said all 17 energy suppliers could make improvements, however Good Energy, Outfox, So Energy, Tru Energy and Utilita were found to have “severe weaknesses”.
The review found “moderate weaknesses” at E (Gas & Electricity), Ecotricity, Octopus, Shell and Green Energy UK and “minor weaknesses” at Bulb, EDF, E.ON, Ovo, Scottish Power and Utility Warehouse. Some suppliers have disputed the findings, calling the review incomplete.
Ofgem said some of the worst examples of poor practice included suppliers failing to read the meters of customers who could not do so themselves. It also found that some vulnerable customers were unable to contact their supplier to top up their meter or to request support credit.
Neil Lawrence, the director of retail at Ofgem, said: “From eligible customers who are missing out on free gas safety checks through to companies not identifying vulnerable customers to be offered obvious support on the priority services register, this robust review has highlighted that suppliers need to do more to support consumers.”
Jonathan Brearley, the Ofgem chief executive, said: “The most important thing for me is ensuring that when you’re applying for help as a customer you’re consistently treated by your company. What we’re finding, particularly with those five is basically pot luck. You might get a good adviser, you may also get someone who doesn’t do the things that are needed.”
However, co-founder of So Energy, Simon Oscroft, said: “Over the course of the last months and weeks, we have provided Ofgem with extensive additional information related to this review and we are disappointed that Ofgem has proceeded on the basis of incomplete information and in a manner that may now cause vulnerable customers unnecessary concern.”
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