Like many energy customers around the country, I did not realise the extent of how the energy crisis was going to affect my household and financial outgoings. We have been with the same renewable energy company for three years now and have kept on top of payments and have been financially responsible. The latest price hike of standing charges, particularly of electricity standing charges, was a brutal wake-up call that despite rising fuel and food prices, somehow extra money had to be shaken from the ‘magic money tree’ to pay energy bills.
In March, our standing charge for electricity was 25.19p per day. In April, it was 46.58p per day – a staggering 85 percent rise.
Overall, we have had a 58 percent rise to our monthly bill and I am conscious from my social media scanning that we may have got off lightly compared to others. It appears that we have no recourse but to try to find the money from somewhere, with more rises expected in October looming.
The government is conspicuous by its absence, with a paltry, meaningless and one-off council tax rebate of £150 being offered at present. The government’s own long-term energy strategy was dismissed in the FT as being “cowardly and incoherent”. Could energy rationing actually be the government’s response? Rising frustration and anger from customers has led to a ‘Big Power Switch Off’ protest, where customers have switched off their own electricity to demand the government’s help.
Heat the human not the home
Money-saving expert Martin Lewis posted on his website last week an article entitled ‘Heat the human not the home’. He stated that the guide was fuelled by desperate customers: “This is a guide I really wish we needn’t be publishing.”
The article, written by Sarah Monro, outlined and costed up ten methods for keeping a human warm, from the use of hot water bottles and USB hand-warmers, to electric blankets. It also stressed the importance of wearing layers of clothes including base-layers, keeping your feet warm and crucially for people additionally struggling with rising food prices, to “eat regularly and have at least one hot meal a day”.
What does the energy regulator say?
I contacted the regulator Ofgem and was told by a spokesperson that:
“Global gas prices this winter reached unprecedented levels, putting the energy market under extraordinary strain. This is a problem across Europe. In Spain, households’ energy bills increased by 50%. Belgium saw prices rise by 130% last year. In Britain, the price cap has provided a ceiling for what customers pay for their energy, acting as a buffer in October so household bills did not reflect the very high cost of buying gas.
“Ofgem’s role is to ensure suppliers do not make excessive profits, and to protect households from high prices and poor service. However, we know there are lessons to be learnt and with hindsight we would have gone further and faster with a more robust financial monitoring and resilience regime.
“Ofgem will continue to closely engage with and scrutinise the resilience of retail energy companies closely, including obtaining detailed financial information. We will continue to work with consumer groups, government, and industry, to protect consumers and build a resilient, dynamic and innovative energy market that is fair for everyone.”
The interesting acknowledgement was that they knew this problem was coming, based the experiences of European countries, and that no preparations were made. More importantly, the regulator had identified that robust financial monitoring of energy companies was not in place and they failed to protect customers. This is little comfort to consumers who have seen their bills soar, potentially out of control.
How have the energy companies responded to the crisis?
Octopus Energy provides the following guidance on its website, which urges people to stay with their current provider, rather than switch and shop around. “Right now, energy prices are at record highs, and most homes will be better off staying with their current energy supplier.”
However, in the last few days, the company has also made a huge multi-million pound investment in a heat pump manufacturer, with the aim of making heat pumps cheaper for consumers to drive systematic change. They have also given away 5,000 free electric blankets to some of their more vulnerable customers, which appears to encourage the switch from gas to electricity. The only problem is that the standing charge for electricity has risen significantly and customers still need to bear the brunt of this upfront cost.
Profits for energy companies?
The PR manager at Octopus Energy responded to my questions and stated:
“We have over 3.1 million customers in the UK and helping them get through this crisis is our highest priority. To be clear – Octopus Energy has never made a profit, and will not do this year either.
“We have instead focused on making sure there is enough support available to our customers who are struggling. Our standard variable tariff ‘Flexible Octopus’ is priced £50 below the current price cap for existing customers.
“Current wholesale prices for energy are 500% higher than they were a year ago. Whilst the UK cannot avoid these global rises, support from government and Octopus can make a significant difference to the least well-off households.”
According to the company’s financial press release in January 2022, the Octopus Energy Group was in a slightly more optimistic position.
- Group’s revenue increases by 62%, from £1.2bn to £2bn, with predictions of this rising to £4bn for 2021/2022
- Octopus Energy Limited: Octopus Energy surged to 2.1 million household customers from 1.4 million at the end of April 2020
- Kraken Technologies: Revenue of Octopus Energy Group’s software licensing business grew from £10.2m to £64.9m and operating profit of £46m
What has caused this energy crisis?
Bulb Energy commented on Twitter to a customer that, “there’s currently only one price for energy in the UK. There aren’t separate markets for green energy sources. When the cost of electricity produced by burning gas goes up, so does the cost of electricity from green sources”. This direct link between the gas price and renewable price for electricity no doubt surprised many customers, who moved to Bulb Energy in recent years, attracted by their ‘green’ credentials.
In information sent out to their customers in February 2022, Bulb Energy blamed rises on the UK dependency on fossil fuels, the changing climate globally, as well as the conflict in Ukraine:
“This increase in wholesale energy prices is being driven by the cost of gas. The UK is still dependent on gas-fired power plants for a significant chunk of electricity generation, and so when gas costs are higher, electricity costs are too.
“There are a number of reasons the price of gas rose to such high levels. Global weather, including the cold winter we had in Europe last year, and heatwaves in Asia, contributed to low gas storage levels in the UK and around the world. There have also been ongoing issues with supplies of gas from Russia. All of this meant that both gas storage, and gas supply, were extremely low. So, the cost of gas rose.”
Bulb Energy became the first energy company to go into special administration, meaning that it is run by the government. To date, £1.7bn has been put aside to cover the company’s trading costs and administration, with this likely to rise. Shamefully, UK taxpayers are currently paying this bill, as well as their own spiralling personal energy bills.
EDF energy and British Gas were contacted for recent comment on the energy crisis. There was no response.
More rises to come?
The final note of concern for suffering and desperate energy customers is that, according to the government forecast, October will likely see a further 30–50 percent increase in the price cap. “Many observers predict that the price cap will increase further in October 2022, forecast increases vary from 30–50%.” This is a burden too much for people to pay without the financial protection from their government.