Households Face a Big Rise in Energy Bills

Damming analysis from retail energy advisors, BFY Group has warned that households face a big rise in energy bills in April.

The report, commissioned by Citizens Advice concludes that “Ofgem allowed unfit and unsustainable energy companies to trade with little penalty.”

Wholesale gas prices may have steadied recently, but with more supplier failures expected, it’s difficult for the energy industry to look ahead to the end of the winter period with any certainty, as the consequences of the energy crisis and the resulting SoLRs is expected to cost £2.6billion.

 

Households to foot the bill

The October price cap saw energy bills rise to £1,277 a year for the 11 million households on standard tariffs. However, the report warns of a additional 48% increase next April, taking typical bills to £1,891.

Citizens Advice claim that due to a “catalogue of errors” on Ofgem’s behalf, households face paying a further £94 a year to offset the cost of supplier failures since September.

 

The Bulb Energy Collapse

In addition to the £2.6 billion cost of supplier failures, Citizens Advice provide a cautionary note, that the estimated costs exclude the costs associated with the collapse of Bulb Energy, the UK’s seventh largest energy supplier.

Although the Bulb Energy collapse is being dealt with through the government-backed special administration, a £1.7 billion taxpayer loan has already been agreed.

Bulb Energy had 1.7 million customers and the eventual cost to bill-payers could be astronomical. Bearing in mind, the cost to bill-payers of the Avro Energy collapse, affecting more than half a million customers, is estimated to be £679 million.

 

A decade of regulatory failings

Citizens Advice have called for Ofgem and the government to act to fix the problems that led to the events since September.

The report has highlighted that:

  • Almost 4 million households have seen their supplier fail since August 2021 alone, with 28 failures this year.
  • Supplier failures since Aug 2021 will cost consumers £2.6 billion - around £94 per customer from 2022. Government has set aside a further £1.7 billion of taxpayer money for Bulb’s failure.
  • Citizens Advice estimate that consumers whose supplier failed and were moved to a new supplier saw average price rises of £30/month.
  • Consumers of failed suppliers are also paying for energy market turbulence with billing delays, confusion and lost debt protections.
  • 40% of people who’ve heard about supplier failures are less likely to switch supplier in future as a result.

Dame Clare Moriarty, Citizens Advice Chief Executive, said: “Energy customers are facing a multibillion-pound bill, in large part because Ofgem missed multiple opportunities to tackle rule-breaking by suppliers.”

Ofgem accepted that the energy market needs reform and plan to announce changes in the coming weeks that shows they are “tackling the pace of change needed, as well as ensuring that fair prices are reflected through the price cap.”

  

Fuel poverty and vulnerable households

Every home should be a warm and safe place, but less than two weeks ago, Fuel Poverty Awareness Day highlighted that support is required for more than 4 million UK households who are in fuel poverty.

The reality is that the situation is getting much worse and we're in for a challenging time unless fundamental changes are made to the energy industry.

Ultimately, costs resulting from the energy crunch will need to be recovered through customer energy bills. This will only further increase the pressure on household finances at a time when rising living costs are forcing families to ‘crisis point.’

 

Government Funded Energy Discounts

There are some short-term options:

It is important that you do all that you can to keep energy bills to a minimum. There are many ways to be more energy-efficient at home and most will cost you nothing. See our top free energy saving tips

 

Help with energy bills

The British Gas Energy Trust (BGET) helps those families and individuals experiencing hardship and struggling with energy debts. You do not have to be a British Gas customer to receive support, but grants are capped at £1,500.

Visit British Gas Energy Trust to find more information or apply for a grant here.

 

Help with water bills

If you’re one of 8 million Severn Trent Water customers, you can apply for help with your water bills.

You could receive up to 90% off the average Severn Trent Water bill through the Big Difference Scheme.

United Utilities supplies water to customers who live in the North West of the country and United Utilities Trust Fund offers support to customers of United Utilities who are struggling to clear their water arrears.

More information can be found here along with how to apply

 

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Any housing associations and social landlords serious about reducing their energy and administration costs should access our void energy management team.

Energy Angels work closely with our housing partners to ensure smart meters are installed in empty properties. If the whole nation got a smart meter, we could save the same amount of energy as it takes to power every household in Aberdeen, Cardiff and Manchester for a year.

Help is available to manage residents' future energy usage and costs and for all void properties, Energy Angels provide a viable renewable energy tariff option in partnership with OVO Energy.