Wholesale energy prices may have fallen back to pre-Ukraine war levels but don’t expect to see this reflected on your next gas or electricity bill. Next Thursday regulator Ofgem will cut its energy price cap by around 18 per cent, but that won’t come into force until July 1, six weeks from today.
Today, the cap is a whopping £3,280 but the average dual-fuel energy bill is much lower than that at £2,500, thanks to the Government’s energy price guarantee, which ends in June. From July, the typical bill should fall to £2,060, bringing a saving of £400 a year for around 27 million domestic energy customers, but many will feel it should be much more.
Wholesale European natural gas prices actually spiked way back in August last year, which means they have taken the best part of a year to feed through to households. Part of this is down to the long-term fixed contract that energy companies use to hedge against market volatility, but there’s a whiff of profiteering as the energy giants pump up record revenues and profits.
Ofgem has just forced two suppliers, Good Energy and OVO Energy, to pay £4 million for overcharging customers. It’s also taken action to stop Centrica using debt agents to break into vulnerable customers’ homes to fit expensive prepayment meters.
Suppliers punish customers who pay by cash, cheque or bank transfer by hitting them with higher charges. Despite July’s energy cap reduction, energy prices will still be double what they were in 2020, according to the End Fuel Poverty Coalition.
This isn’t the only factor driving the cost of living crisis as food bills also soar, with consumer champion Which? reporting some supermarket prices have doubled.
Millions continue to face a tough choice between heating and eating, with council tax and Chancellor Jeremy Hunt’s income tax freeze adding to the pressure.
It doesn’t help that the nation’s housing stock is poorly insulated, with more than nine million Britons living in cold, damp homes last winter, according to the Warm This Winter campaign.
Switching home energy supplier has been pointless given the lack of cut-price tariffs, but this may change as early as next month, as providers may take this chance to launch competitive new deals ahead of the lower cap.
That will offer some respite but campaigners are warning against locking into fixed-term deals, which may be more expensive than standard variable tariffs. Energy company profiteering is a factor here, too. Structural inequality remains, with customers in regions including North Wales and Merseyside paying more than others
In a final blow, the price cap is expected to rise again from October, putting yet more pressure on household budgets, and we don’t know what support the government will offer this time.
Energy prices may be falling but the crisis is far from over.
