Energy bills rise by £116 for 2.5million homes despite cap

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Around 2.5 million households in Britain have seen their yearly energy bills soar by an average of £116, despite the Government capping prices until April. While the Energy Price Guarantee (EPG) was designed to limit bills to an annual maximum of £2,500 to shield Britons from staggering wholesale costs amid Russia’s war in Ukraine, the cap only applies to households with typical energy usage.

But for those on Economy 7, a type of energy payment plan, the global surge in gas and electricity prices is causing more of a headache as their bills still surged by 7.6 percent on average, according to an analysis by energy consultancy Future Energy Associates.

The consultancy also found that those on these payment plans are now paying 46 percent more for their bills than those on electricity-only tariffs. For households paying these electricity tariffs, they are charged different night-time and day-time rates. Energy suppliers of this tariff have the ability to set their own rates, and due to this, were able to increase them on January 1.

It came after the Government’s energy regulator Ofgem, brought up the prices firms were able to charge those customers in January. And companies have appeared to do just that. According to Future Energy Associates, an average Economy 7 yearly bill is £2,964, far above the £2,500 price cap.

Jonathan Bean from Buckinghamshire, an Economy 7 customer, saw his Scottish Power bills jump by 13 percent. He said: “I’m already paying three times more for my heating and hot water than those with gas or oil. Now yet more price increases have come in, whilst support payments are being cut. My son and I will literally freeze this winter, and next.”

Andrea Robinson a retired nurse from York, is on Economy 7 and relies on electricity to both heat and power her home. She lives in a village that is not connected to gas mains.

She told the BBC that her energy supplier, Octopus Energy, sent a letter saying her bill would go up by 8 percent in January. Alarmed by the news, she decided to do the calculations for herself and concluded that this “didn’t make sense”.

Ms Robinson said: “I watch every penny. It just didn’t make sense when I added up the numbers.

”It looked like I would be paying about a pound a day more to be on Economy 7. If you work it out over a year that’s over £300. It’s a lot of money to pay on top of what you’re already paying and obviously you’re facing another rise potentially in April.”

The April rise Ms Robinson is referring to is the change to the energy price guarantee, which Chancellor Jeremy Hunt announced will go up to £3,000.

Now, campaigners are now calling for the Government to extend the “alternative fuel payment” of £200 to all households on electricity-only tariffs and commit to rolling out reforms to the energy pricing arrangements as soon as possible

Simon Francis, Co-ordinator of the End Fuel Poverty Coalition, commented: “Millions of people have been forced into deeper levels of hardship this winter due to this price hike. This will lead to people living in cold damp homes which can cause significant health complications, which only puts more pressure on the NHS.”

Tessa Khan, Director of Uplift which is part of the Warm This Winter campaign, commented: “As the growth of cheap UK renewables drives down the cost of generating electricity, energy firms should be lowering the rates they charge. The government needs to urgently get on with reforming energy pricing, as well as ramping up the development of homegrown renewable energy, so that consumers can benefit from cheaper, clean energy now and in winters to come.”

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It is not all doom and gloom as research firm Cornwall Insight’s latest price cap forecast suggested that energy bills will fall twice this year. It comes after gas prices plummeted to pre-Ukraine war levels as warmer weather, the filling up of gas storage sites and lower energy consumption appeared to calm the markets.

Without Government intervention, Cornwall Insight said that a typical household would have to pay about £3,208 from April. While this is higher than what Britons are currently paying, the price cap was previously expected to hit £3,545.31 in the same period.

Cornwall Insight experts predicted that after the April to June quarter, households’ energy bills will plunge to approximately £2,200 from July, and would stay that way until the end of the year.

Cornwall Insight said: ”Our forecasts show prices in the second half of 2023 remaining below the Energy Price Guarantee (EPG) level, and therefore will not cost the Government any money from July.

“With wholesale prices still well above pre-pandemic levels, the lower cost of the scheme is likely to spark conversation on the additional energy bill support the Government may now be able to offer households.”

For those on Economy 7, Government support may not be able to soften the blow to the same extent as typical households.

An Ofgem spokesperson said: ”The bottom line is, if Economy 7 customers use cheaper off-peak electricity for night-storage heaters, they can make substantial savings. They will pay more if they use more peak-time electricity.”

Night storage heaters started to grow in popularity back in the 1960s and 1970s. During the same period, Economy 7 became a more common payment plan. They work by drawing in electricity over the course of a few hours at night, storing it as heat in a so-called “bank” of clay or ceramic bricks, so it can be used the next day.

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