/ Home & Energy

Government announces £50 off our energy bills – is it enough?

Coin on gas flame

Four days ahead of the Autumn Statement, the Government has announced proposals it says will save the average British household £50 on their energy bills.

We’ve long been calling for sky rocketing energy bills to be brought under control. The message seems to have gotten through to the Government. Today Ed Davey confirmed that they would take action by cutting back on the levies we all pay for on our bills.

The Warm Home Discount will still be available for vulnerable households, but the cost of this will now be met by the Government via a rebate on your energy bill for two years. Changes will also be made to the Energy Company Obligation (ECO), an insulation scheme, so that it can be delivered more cost-effectively. These are both changes we’ve been calling for as part of our ‘Cut them down, George’ campaign.

As we discussed last week on Which? Conversation, it’s right to refocus the Energy Company Obligation so that it gives greater priority to low-cost measures, such as loft and cavity wall insulation. But the suppliers must now commit to greater transparency and to getting their costs down, fast.

The Big Six make promises

All of the Big Six energy suppliers have confirmed that they’ll pass these savings on to their customers. British Gas, for example, will cut its gas and electricity prices by 3.2% in January 2014 for an average dual fuel saving of £53. Although this does follow its price rise of an average £123.

EDF and Npower have said they won’t increase prices before 2015, except if wholesale prices go up. Npower will also seek to reduce the 10.4% price rise it implemented over the weekend (EDF hedged its bets by announcing a lower 3.9% rise). SSE and Scottish Power have said they’ll pass on the full £50 saving. And Eon, which hasn’t announced a price rise this year, said the government’s changes will mean their customers will pay less next year than would’ve been the case.

We still need major reform

It’s about time the Government started getting the cost of energy under control and this is a welcome step in the right direction for everyone who’s struggling with the increased cost of living. But, ultimately, bills are still rising.

This is why we’re still calling for major reform of the energy market to make it truly competitive. We also need to see a comprehensive review of the Government’s energy efficiency policies. And any other policy costs that are passed onto our bills, be it smart meters or the carbon floor price, must be rigorously scrutinised and kept low.

What do you think about the Government’s proposals to cut bills by an average £50? Will they make a difference to your energy budget?

Comments
Member

(EDF hedged its bets by announcing a lower 3.9% rise) Handy that. Wish they’d use the same crystal ball to buy in forward orders at cheaper prices rather than always seeming to pay top dollar.

As I’m one of those that switches I’m already on one of the cheaper fixed tariffs, so I’d rather have received a £50 in my bank account, rather than it will save be £50 over next year.

“EDF and Npower have said they won’t increase prices before 2015” Both companies already have fixed tariffs than run at least that long, and as I’m on one of them I’m now going to have to look at switching again if their standard variable is “fixed”.

Member

It’s just a drop in the ocean. What is needed is a thorough investigation into the whole industry from the ‘marketing’ of raw fuel, generation, distribution and end suppliers.

It’s the same underlying businesses that have interests in all areas: they just use different registered companies to practise their cloak and dagger operation.

It doesn’t help that the government is creating false costs by forcing the suppliers to insulate housing and provide HUGE and totally unwarranted subsidies for generating power using crack-brained windmills and PV panels. To confound all that, the EU has added carbon tax which is traded like a commodity making loads of traders rather wealthy.

It’s all totally bonkers.

Member

I agree that proper investigation of the energy supply industry is needed.

I would like to say something in defence of home owners using solar panels. In my experience they make people much more aware of their energy use. However, I do not support subsidies and if householders receive payments for feed-in, these should be at exactly the same rate that the electricity would cost to buy.

Member

I entirely concur. Only a minority of properties are suitably positioned or constructed to benefit from PV solar panels so the feed-in tariff scheme has in-built inequities; getting free energy when the panels are generating and being able to sell the surplus at a commercial [but not premium] price should be reward in itself.

Member

I agree about being aware of energy consumption. We have an OWL energy meter prominently displaying our real-time consumption as well as a device for measuring the consumption of individual items.

However, where’s the progress on gas consumption? The gas meter tends to move at such a slow rate as to make consumption of individual components boringly tedious. Our gas fire is stated to be 78% efficient with an input of 7 kW. I take this on trust as correct, but it is still difficult to work back to how much it is costing to run when on anything other than full output. I’d like a gas flow device so that we can measure the real-time consumption of a gas fire, gas oven or boiler to see what is burning off expensive power.

Member

It seems that “fixed means fixed” for many customers whose energy suppliers have confirmed that there will be no reductions on their longer term tariffs in consequence of the government’s removal of various imposts. Whether this also applies to the most popular one-year fixed tariffs is not entirely clear and I think the approach to this so far by the big energy companies is somewhat dishonourable: if a state-imposed charge comes off then the bill should go down. We are now seeing another drawback of the government using the commercial sector to “pass through” various elements of fiscal policy onto consumers instead of being honest and incorporating them in excise and revenues. Eventually control of the application, impact, effectiveness and integrity of these measures is dissipated. Exchequer-funding the Warm Home Discount is probably the right thing to do overall and the extensive reach of taxation means that its impact will be minimal even on those who, by virtue of not being mains energy consumers, have not contributed to it hitherto.

While slightly lowering the cost for the majority of households who have mains gas for heating and hot water, I hope the government will not overlook the considerable number who rely on oil, LPG and electricity and will take measures to keep their costs in check. At the very least they should be able to benefit from any subsidised energy-efficiency and insulation programmes to reduce their heat losses and lower their bills.

Many leasehold properties nowadays are fitted with electric convector heaters for space heating; they have Economy 7 for hot water heating but during cold weather the room heaters need to be on in the day-time and/or evenings when the rate is around twice the Standard tariff rate. This bears heaviliy on one-income households and pensioners; switching to a standard tariff might be beneficial if their management company or freeholder allows them to replace their two-rate electricity meters with a single-rate one [why the energy companies cannot total the two kWh readings to produce a unified consumption record I have never understood]. These customers typically are unlikely to benefit from the tiered tariffs that perversely favour higher consumers through lower unit charges. The capital outlay for substituting night-storage heaters is generally prohibitive and I am not sure whether the Green Deal can help with this.

Member
Mark says:
6 December 2013

Yes, there is a definite problem here. Your statement in the main report that “SSE and Scottish Power have said they’ll pass on the full £50 saving” is plain wrong on the basis of the information given here: http://www.moneysavingexpert.com/news/utilities/2013/12/government-shakes-up-energy-bills-what-does-it-mean-for-you

Neither company has confirmed it will pass on their own savings from both the reduced levies to those of their customers who are on fixed tariffs (quite a significant proportion of the total these days, I would think). In fact, Scottish Power has explicitly said that it will not pass on the ECO levy savings to such customers (which includes me).

In fact, only British Gas and nPower have said that all the savings will be passed on to all customers.

I haven’t checked the small print in my contract, but I would expect there to be an item that says that if, for instance, VAT were to go up during the lifetime of the contract, that would be passed on to me, fixed rates or not. That’s just normal business practice in my understanding.

So, if a government levy is coming down, that should be reflected in all exisiting contracts, including those on fixed deals.

I think this would make a worthwhile topic for Which? to take up with the relevant companies and the government – who, like youself, stated wrongly that “All of the major energy suppliers have confirmed that they will pass the benefits of this package to their customers.”