/ 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.”

Member
Mark says:
9 January 2014

If I may reply to my own comment above-

Sadly, I have still not seen any action from Which? on the failure of several of the big six energy companies to pass on the reduction in the ECO levy to their customers on fixed tarrifs (even though the old levy must have been priced into those tarrifs, and the companies later gave an undertaking to the government to pass on the savings from the reduced levies to their customers).

The good news is that Moneysupermarket.com has now started a petiton on the government’s e-petition site asking the government to hold the companies to their word. One can sign it here: http://epetitions.direct.gov.uk/petitions/58784

Member

The key to this is a thorough understanding of what makes up both our gas and electricity bills. Ofgem explains the make up of your bill in a fact sheet:
https://www.ofgem.gov.uk/ofgem-publications/64006/householdenergybillsexplainedudjuly2013web.pdf
This raises as many questions as it answers –
– Just what is the real cost of the raw fuel – gas and electricity without the admin and profit? How has this really changed? As it makes up perhaps 50% of your bill, a 10% bill increase put down to raw energy costs means that the raw fuel has gone up 20%. Is that really the case?
– Transmission and distribution costs make up a substantial part of the bill – up to 20%. Does this mean 20% of every bill funds this, or is it totally included in the standing charge (if you choose to pay one?). Ofgem “control” these costs – do they achieve this competently? Is that market competitive/
– What is it reasonable to charge for admin of your bill – another hidden cost. It should be a fixed amount for every bill payer, but is it?
These % costs are very misleading, with such a large range of bill sizes.
– And why are the many independent suppliers so similar in price to the Big 6 – are they setting their prices to be in line and making larger profits?

In view of the publicity being given to energy, I am astonished that no independent organisation has got to grips with revealing the real costs so we can have a fact-based debate. At present it is fuelled largely by opinion and politics – not a good mix!

Will we tackle the cost of food, rent and house prices, and motoring next? They consume more of our cash than energy in many cases. The issues are just as murky.

Member

I agree. My provider (Cooperative Energy) charge exactly the same odd sum for the distribution costs for gas and for electricity. (IIRC it is something like £49.23 each). How can gas distribution and electric distribution cost an identical sum?

I expect the reality is that they don’t have the foggiest idea of the true cost and they had an all-day meeting to discuss this and used a ouija board to come up with the fictitious charge.

Member

Ofgem propose a mandatory 3 week maximum switching time to another tariff or energy company. Out for consultation – you can comment! See:
https://www.ofgem.gov.uk/ofgem-publications/84900/3weekswitchingconsultation.pdf
This is in addition to the 14 day (maximum) cooling off period, but you can start the process by agreeing early in that 14 days. I don’t know how long the energy companies will be allowed to take to make you a confirmed offer after you have elected to switch initially – that can take a few days. I have asked the question. A step in the right direction though.

Member

Energy Company Obligation has now become Energy Company Abrogation in my view. £1 per week reduction at nil cost to the Energy Co’s is a start but a long way from resolving the deeper issues within the market, some of which have already been discussed at length here.
I will reserve any further comment until after the Autumn Statement on 5th.

Member
Sophie Gilbert says:
5 December 2013

Why should we expect a government elected by the me-me-me (and my shares) brigade to do anything of real value to the average consumer? This is a cop out, a disguise for inaction, inaction compared to what could really be achieved.

Member
Sally Montgomery says:
23 December 2013

I agree, they are part of the problem rather than part of the solution.

Member
mammamorty says:
6 December 2013

in january…. just when the most expensive quarter is coming to an end……….pffft

Member
John H Hutchinson says:
7 December 2013

I’m not at all sure how I shall spend the £50. Will it change my lifestyle? It would be good to spend that saving to raise the temperature in my home but I don’t know by how much I should raise my thermostat to spend that saving.

Member

The Government has engaged in a bit of political sleight of hand, which “Which?” has unfortunately fallen for! All they have done is to shift some costs from the energy bills to general taxation, leaving the energy companies free to make the same excessive profits while advertising that they have cut the bills!

Member

Peter, I’m not sure this is really fair. At present, all bill payers contribute to the levies, don’t they?. If we assume these levies are still worthwhile (if they help those who are genuinely in need) then only people who pay tax will in future contribute. I think that has an element of fairness about it.

Member
Sally Montgomery says:
23 December 2013

I agree, having made a stupid statement about the lights going out and the advice to wear a jumper.
Followed by headlines of almost £6000 expense claims to heat a mansion, run a business, heat stables and house an employee, by just one MP, this was a grasping at straws. The reality is they will give us back £50 of our own money, added to our bill to provide something which wasn’t delivered thereby reducing our ability to provide it for ourself ( ECO ) our bills will still increase by approx £70 then we have the green deal with all it’s flaws which will go to taxes.
The Energy providers do exactly what the supermarkets do. I’m not against profit but I’m against excesive unethical profiteering. We need affordable food and energy and we need energy efficient homes. Those who can afford to do this themseves will be investing those who cantt should be assisted. We all gain at the end of the day.

Member
Andy says:
8 December 2013

Unless I’m missing something, doesn’t the government add VAT (5%) to these fuel bills. As these are going up much faster than inflation, the government is effectively getting a windfall tax. They keep blaming the big 6 for putting up prices, while quietly benefiting from this. Why don’t they reduce the level of VAT or put some form of cap on it, as they eventually did with petrol/diesel?

Member
Sally Montgomery says:
23 December 2013

I agree removing the VAT would be a good move at least Cameron can’t wimp about the lights going out, missing the point that for many putting their lights on is not an affordable option

Member
Paul Hunt says:
9 December 2013

“Don’t mention the EU.” This failed British model of privatised electricity and gas industries, with captured economic regulators and faux ‘compeittion’ among vertically integrated abusers of market power, has been adopted and adapted throughout the EU – and is also failing there. It has been adopted and adapted to the extent that much of British energy and climate change policy is now governed by primary EU legislation and regulations.

The British electricity and gas markets are but parts of increasingly integrated EU electricity and gas markets. Remedying the costly failings in Britain requires remedies at the EU level and these may be provided only by a comprehensive DG COMP energy sector inquiry. But, whatever you do, don’t inform British citizens of this reality. Let them believe that Britain remains in splendid isolation and is totally in control of its destiny in these matters. It will comfort them as they pay more and more to avoid freezing in the dark.

Member
Phil says:
9 December 2013

Got my merry festive letter from E.On today about January’s price increases. Although they may have only increased their energy prices by a modest amount they have also increased their standing charge, cancelled the £3 a quarter prompt payment discount and the £20 pa no mains gas discount.

For some people this is going to equate to a considerable hike in costs before the increase in energy cost is taken into account.

Member

You had better start paying tardily.

Member
Phil says:
9 December 2013

I’m going to; and it’ll be a cheque in the post too!

Member
Sally Montgomery says:
23 December 2013

Well I’ve given up on the Govt and the Energy providers. Neither Eco or the Green Deal are working I’m eligable under Eco but essential basic insulation has not been forthcoming. So I’ve switched of all my lights, am managing to keep my heating just above danger levels. Have allowed a company to rent my over roof space, they get the grid money but I get some usage. Not ideal but the only affordable option. I’ll insulate my loft and my gable end wall myself. Will have a wood burning fire in by next year. I’m self sufficient in food so plan to be the same with energy. I’m a bit cold and miserable, am praying for a short mild winter and a decent spring/ summer. But I’ve given up on anything else. It’s likely to get worse rather than better and I’m not getting any younger so need to act fast. I will not be held to ransom or give in to threats of ultimatums and I don’t plan to starve or freeze.

Member
Member
DickieMint says:
31 December 2013

Got an email from coop energy, seems the new deal is going to cost me!
“Changes to your share of the profits
We need to let you know about some changes we have had to make as a result of a Retail Market Review that has been undertaken by our regulator, Ofgem. The aim of their review has been to create a simpler, clearer and fairer market place for energy customers.

To meet the new requirements following this review, all energy suppliers have had to evaluate the incentives offered to their customers. After 31 December 2013, energy suppliers will no longer be able to offer certain types of discount to their customers. How does this affect you?
Currently we offer the following incentives because you are a member of Co-operative Group

One membership point for every £1 you spent with us Share of the profits distributed each year

The regulator has instructed us to cease operating this scheme as of 31 December 2013. This is because you, as a member of Co-operative Group, do not have a direct democratic link to Midcounties Co-operative.

It has been agreed that we can honour points earned up to this date and the appropriate share of profits will be paid to you in the next payment Co-operative Group makes to you.

We appreciate this change will be disappointing news for you, and it was not one that went unchallenged. However, it is a change we have had to make to ensure we meet all our regulatory requirements.”

Despite being the Co-op, there are different ones and I’m a member of the wrong one!
I’m assuming becoming a member of the Mid-Counties coop will restore my ‘divi’. But other coop Energy users beware of this OFGEM stupidity.

WHICH?, is there anything you can do?

Member

The principle behind the Ofgem recommendations put out to consultation in March (Retail Market Review proposals – Ofgem document 27/3/13) was to simplify tariffs. It seems that many incentives tacked onto tariffs made their true value difficult to assess and so the regulations have been designed to minimise this lack of clarity. The proposals and reasoning can be found in the RMR document, and responses to them in the August RMR document, available online at Ofgem. Worth reading before getting hot under the collar. There are still allowable rewards that can be part of a tariff contract.
I am not commenting on where the profit points from Co-op fit into this, but presumably where a supplier wishes to attract custom by offering a reward, one that complies with the current regulations will no doubt be made available.
We wanted simplification, and that has largely been delivered (even though some may disagree with the final outcome).

Member

MR – Your point is well made. However the position as quoted shows that joining the MidCounties Cooperative puts Dickie Mint back in the same position as before. So what had been relatively straightforward- member of a Coop getting a point back per pound spent at Coop [on anything] is now a matter of belonging to the right co-operative society.

Fortunately it only costs £1 to join:
https://www.midcounties.coop/join-us/TermsAndConditions.aspx

Given the additional fuss for the 140,000 people who buy energy from the Co-op having to pay a nominal £1 and register it is a shame someone was unable to use an element of common sense.

Member

dieseltaylor, I suspect the Co-op scheme fell foul of the Ofgem requirements on a technicality, and could be structured to meet the rules if necessary. Perhaps the Co-op could provide a full explanation. Maybe it was because you had to pay to join the scheme? I’ve looked at the Co-op site (which, incidentally, still refers to a dual-price tariff that is no longer allowed) and tried to fathom the Ofgem rules without complete success.

Member

What a remarkably stupid situation.

Member

Anyone who thinks that simplifying tariffs won’t result in removing the cheap tariffs leaving the expensive ones is sadly not living in the real world.

Member

Ofgem (extract) from response:
“Ofgem has not seen the details of the Labour Party’s analysis that forms the basis of its allegations that consumers have been overcharged for their energy. We would clearly consider more detailed information as part of our state of the market report in March. Ofgem regularly looks at the relationship between wholesale and retail prices and our own analysis of the evidence does not support this allegation.”
This seems to be about wholesale electricity prices being rigged in vertically-integrated generators/suppliers.
I would hope that this would have been investigated already by Ofgem in view of comments made over the last few months. If not, or if ineffective, then Ofgem should be thoroughly investigated as regard to it’s competence, or lack of.
I would also have thought that a responsible political party with concrete grounds to support such an assertion would have given these to Ofgen, rather than trying to score cheap points by grabbing headlines. Politics is a dirty business when this happens (unless Ofgem have rejected their analysis, which seems not to be the case) that seems to serve the politicians’ careers rather than the public whom they serve (and who pays them).

Member

“We would clearly consider more detailed information” sounds like Ofgem haven’t bothered to ask the right questions (of the right companies) in their review otherwise they’d already have all the relevant information, surely ?

“Ofgem regularly looks at the relationship between wholesale and retail prices and our own analysis of the evidence does not support this allegation.” have they actually asked the power generators how much it actually costs them to generate the stuff. I doubt it.

Member

I agree – this information is crucial in order to determine the difference between wholesale and retail prices. If Ofgem are unable to get down to grass roots level In a vertically integrated market system,
consumers are never going to benefit when prices dip.
It would appear DickieMint has been caught up in yet another convenient market trader scam where companies can engage in certain questionable tactics to suit their own ends again at the expense of the consumer.

Member

Apparently Labour’s allegation is partly based on “information from an independent supplier” – First Utility. According to a report in today’s Daily Telegraph, this supplier put its prices up by 18% last summer; it has suggested that to cut bills you could shower with a friend, cut down on hot drinks, wear a sweater, have early nights so you can switch off the lights and tv….. I like practical advice, rather than rhetoric, don’t you. Any other ideas? Incidentally, i remember when the advice during the 3 day week in the ’70s was to bath with a friend – I suppose reducing that to a shower shows what inflation has done for us.

Member

Thank you Malcolm. I was browsing the DT outside a petrol stattion earlier today and thought somebody was bound to pick this story up and post it on Which? Conversation, and if they didn’t I would. Trivialising the energy cost issue is apparently the new game in town. It is an insult to the millions of people on low [usually fixed] incomes who are suffering acute anxiety over prospective energy bills and those who are living in older and intractable accommodation where there is virtually no viable way of reducing consumption and maintaining a satisfactory temperature. Meanwhile multiple megawatts are being wasted in retail and commercial premises with unnecessary lighting, inefficient heating and ventilation, and high-energy-consuming apparatus adding to the overall power demand, forcing up wholesale prices, and adding to the costs of goods and services.

Member

If the report in today’s Independent paper is accurate then there is a real spat going on between Government and Ofgem. My view is that no-one has either thoroughly investigated the way the market works, nor put figures in front of us that we can challenge to see what really happens in this market. We need a properly informed discussion. This is where Ofgem should be contributing facts to us, but don’t. So I have little sympathy for their position but wonder how impartial the report is. Politicians and newspapers …….? Incidentally, as the “Big 6” are not the highest chargers in the market, we must also question the profitability of the others.

Extracts from the report:
Senior ministers have made it clear that unless Ofgem takes swift action to improve competition and curb the profits of the “big six” energy companies, then the future of the regulator itself will be called into question……………
“Ofgem was set up to regulate the market and protect consumers from being over-charged for their gas and electricity,” said a senior Government source.
“But it is quite clear that in recent years it has lost sight of this objective. There is obviously a problem and Ofgem must resolve it. We are optimistic that they will but this is last chance saloon.”……………..
In theory it is up to Ofgem to regulate both sectors of the energy market to ensure there is adequate protection for consumers and that the energy companies do not make excessive profits.
But ministers have become increasingly concerned that the regulator, which is independent of Government, has become too close to the industry and has failed in its duty to consumers.
While it cannot dictate what Ofgem does, the Government ultimately has the power to scrap the regulator and bring market regulation back into the Department of Energy and Climate Change.
One senior official said: “Ofgem have been a nightmare for years. They keep Government in the dark about what they’re doing and then spring things on us at the last minute – usually at 3.30 on a Friday. There is not much sympathy for them in Whitehall.”
Another political source said there was frustration at Ofgem’s inability to explain what it was doing to protect consumers from excessive price rises. “I think there are some good initiatives going on around price transparency and making it easier for new entrants to come into the market, but Ofgem has been totally useless at explaining this to the public.”

Member

Maybe there is some action. Ofgem have published this today:

“Chief Executive’s response to The Times article published on 3 February

Publication date
Monday, February 3, 2014 – 17:15

Dear Sir,

Following the article ‘Energy chiefs lash out as Ofgem looks into trades’ (3rd February) I would like to make clear that Ofgem and the Office of Fair Trading (OFT) make no apologies for asking energy companies to provide the right level of information to assist with the first of the annual assessments of competition in the energy market. At a time when suppliers need to restore trust in the energy market it is important that these companies comply with these requests rather than sniping at the regulators for doing their job. Ofgem and the OFT take a proportionate approach to gathering information and we have not asked for information on every single trade. However, no one should be in any doubt that we will not hesitate to acquire the information we need for our review.

This is a wide ranging review looking at how well competition in the markets for gas and electricity is serving the interests of households and small firms, and we are carrying it out with the OFT and the Competition and Markets Authority (CMA). Energy companies were required to provide us with the information we requested using powers in the Gas and Electricity Acts, and have now done so.”