This week, Ofgem, the independent energy regulator, announced the price cap for the period April 1 to June 30 this year. Trouble is, I am struggling to understand it.
Their press release from Monday February 27 said: “The energy price cap will be set at an annual level of £3,280 for a dual fuel household paying by direct debit based on typical consumption, a reduction of almost £1,000 from the current level, of £4,279 which reflects recent falls in wholesale energy prices.”
Now, that doesn’t mean anyone with gas/electricity dual fuel will pay £3,280 per year, that figure is a nominal figure to represent what an average gas/electricity user would pay in a year.
Now, averages are wonderful things. In mathematics is usually refers to the mean – add ALL the values and divide by the number of values. But here, unless you know what the range of values is and the number of values, we really just haven’t a clue.
Of course, this means nothing for anyone who only has electricity and either relies on it to heat their homes or they have a different heat/hot water source – maybe oil of Liquid Petroleum Gas (LPG).
Then there are those who have prepayment meters who actually pay MORE for their energy.
So, what you will pay depends on what energy types you use, what type of meter you have, how you pay (direct debit or as and when the bill comes), exactly how much you use and what the unit cost of your energy will be.
To work this out you need to look at a recent energy bill which should tell you what you have used in the last year and, usually, what they calculate you will use in the next year. The latter is how they work out what your direct debit will be if you have one.
BUT, and this is a big but, nowhere in the Ofgem press release does it say what the unit cost will be. The reason is probably because there are too many variables, but it also depends on where you live as each utility company will set a rate that is applicable to your geographical location.
In order to see what you might pay, you need to decipher your utility company’s website.
For example: Cumbria Crack Towers has electricity supplied by EDF. The current unit cost is 66.76p per kilowatt hour (kWh). The Government discount is 33.44p per kWh which means we pay 33.32p per kWh. If we use 5,000kWh per year, that is 5,000 v 33.44p = £1,672.
But hang on, there is also a standing daily charge of 43.26p per day which adds £157.90 and a grand total of £1,829.90 which translates to £152.50 per month direct debit.
Yes, that is well below the ‘average’ figure of £3,280, but we have to pay for oil for heating and hot water and we do have the benefit of some solar panels on the roof.
So, what is changing? Simply, it is the Government discount. After Liz Truss tried to completely destroy the economy, the new Chancellor, Jeremy Hunt decided that her discount was too generous and unsustainable. He couldn’t change what had already been put in place and had to wait until the next scheduled change – April 1 2023.
Hence, with energy prices generally dropping, because the Government discount on energy unit prices is coming down significantly, we will all be paying more in the next three months. As for the rest of the year, a further announcement will be made towards the end of May.
Add to this the end to universal support where everyone should have received £400 in six monthly payments, then almost all direct debits will go up next month.
Of course, if you are lucky enough to have a fixed deal then the energy costs will go up when that deal ends. Well done if you have a fixed price deal but be aware that when it ends your bills will go up substantially and you should be prepared.
Now, there is a campaign to ask the Chancellor to use some of the money he has saved by falling energy prices, led by, amongst others, Money Saving Expert Martin Lewis. If the reduction in the Government subsidy is not to go ahead in April, the Chancellor will have to make an announcement soon as energy companies need to know.
So far, there is no sign he is prepared to do this.
The bottom line for UK energy users is that prices will continue to rise in the short term while energy companies make eyewatering profits, countries who export oil will continue to dampen production to keep prices high and Russia will continue to sell oil outside of any western sanctions to countries who aren’t supportive of defending Ukraine. That’ll be the likes of China and India, the latter with whom the UK Government is currently negotiating a post-Brexit free trade agreement.
Has the Government the bottle to tell India it can stuff its trade deal and concessions on immigration to the UK while they are shafting us by supporting Russia and are a factor in our energy prices being so high?
No, I don’t think so either and your purse/wallet will continue to pay the price.
About Cumbria Cat
Born in Cumberland and, from April, will be back living in Cumberland, having spent most of the past 50 years in some place called Cumbria, this cat has used up all nine lives as well as a few others.
Always happy to curl up on a friendly lap, the preference is for a local lap and not a lap that wants to descend on the county to change it into something it isn’t. After all, you might think Cumbria/Cumberland/Westmorland is a land forged by nature – the glaciers, the rivers, breaking down the volcanic rocks or the sedimentary layers – but, in reality, the Cumbria we know today was forged by generations of local people, farmers, miners, quarriers, and foresters.
This cat is a local moggy, not a Burmese, Ocicat or Persian, and although I have been around the block a few times, whenever I jump, I end up on my feet back in my home county. I am passionate about the area, its people, past, present and future, and those who come to admire what we hold dear, be it lakes and mountains, wild sea shores, vibrant communities or the history as rich and diverse as anywhere in the world.
