Ofgem’s Latest Move: A Slight Dip in Price Cap Won’t Melt the Iceberg of Fuel Poverty, New Data Warns
In a fresh announcement, Ofgem—the UK’s energy regulatory body—breaks the news that there will be a reduction in the average dual-fuel energy bill. For the first time since the tumultuous period starting in April 2022, the account will duck under the £2,000 benchmark, hitting £1,923. Not to be lost in the shuffle, this is still a staggering number for many households.
The clock’s ticking: the new cap starts October 1 and stretches until year-end. The dive is £151 from the previous cap, at £2,074. Moreover, prepayment caps are also getting a haircut; they’ll drop from £2,077 to £1,949. The standard credit top has been shaved from £2,211 to £2,052.
Slightly complex but relevant—Ofgem bases this cap on a current rate called the typical domestic consumption values rate. This revised rate will sweep into effect this coming October, laying the groundwork for the cap adjustments in 2024.
While this descent marks a relief from sky-high energy costs, rooted in the geopolitical quagmire and market volatility, it’s hardly a reason to pop the champagne. Gas prices had shot through the roof, thanks in part to the Russian invasion of Ukraine, disrupting the balance of the global energy ecosystem. Alternative gas sources and bolstered energy security measures have helped, but the market is still a wild horse, unpredictable and prone to kicking.
Ofgem’s CEO, Jonathan Brearley, minced no words when he said the lower cap is a positive stride but not the solution to the mammoth challenge of cost-of-living stress. He urged suppliers to step up their game in customer service and beef up their financial buffers against potential bankruptcies. “A soon-to-be-implemented consumer code of conduct will set the bar high, particularly for interactions with vulnerable clients. No excuses,” he remarked.
But wait, there’s more. Just when you thought the news was all roses and sunshine, here comes a cloud of sobering facts from the Energy and Climate Intelligence Unit (ECIU). Homes scoring low on the Energy Performance Certificate (EPC) will still feel the pinch. Bills for these poorly insulated homes could be a staggering £720 more than those with better EPC ratings. Even an average EPC-rated home could end up coughing up an extra £275 this winter.
Jess Ralston from ECIU didn’t sugarcoat it. “We’re not clear yet,” she said. She tossed the gauntlet at the government, lamenting the missed opportunities for energy efficiency improvements. North Sea projects? A dead-end, she says, for reducing costs. The UK needs a shot in the arm when it comes to green technologies and home insulation.
Meanwhile, E3G, a climate think tank, blasted the government for their lethargic response to fuel poverty, citing the under-performance of the Energy Company Obligation scheme. Juliet Phillips, a policy advisor at E3G, called it a “major delivery flop.” She admonished the government to step up their game—pronto.
Mike Thornton, chief at the Energy Saving Trust, echoed these sentiments. He emphasized that it’s high time we not just play defence but go on the offensive against the root causes of these soaring bills. “Let’s dial back the demand, people,” he said. “Efficiency can and should be everyone’s game plan.”
And what do the people think? An Ipsos survey showed a significant appetite for investing in renewables and energy efficiency. However, many are caught between the rock of economic hardship and the hard place of climate change responsibility.
In a nutshell, we’re inching forward, but the road is long and filled with potholes. The energy crisis and the climate emergency are two sides of the same coin, and it’s a currency we can’t afford to devalue. So, while today’s news from Ofgem might offer a sliver of financial relief, it’s far from a game-changer in the broader picture of fuel poverty and energy insecurity.