Ministers tell UK energy firms they must pass on price savings to customers

After a turbulent year of energy costs rising, ministers have warned energy firms that they must pass on the benefits of lower wholesale prices to consumers. Wholesale gas prices have fallen sharply in recent months, but this drop is yet to feed through into household bills because suppliers buy their energy months in advance.

This latest announcement from Grant Shapps, the Secretary of State for the Department for Energy Security, is believed to be an apparent sign of government concern about the impact of reduced direct support for domestic energy bills, which is set to end in April. It has also come amid concerns that bills could rise even higher than they currently are.

At the end of February, the energy regulator, Ofgem, said its energy cap (which is the amount suppliers can charge for average dual fuel) would fall by 23% for the three months from the 1^st of April to £3,280, from £4,279 for the January to March quarter. While this reduction may look good on paper, the reduction in government help means that the actual price paid by an average household will in fact rise – from £2,100 a year in April to £3,000.

Not only has the UK seen huge hikes in energy prices, but the price of other goods, including food and petrol, has also increased. This cost of living crisis has been seen in other countries too, as the global economy recovered from its pandemic-related recession alongside an increased demand for products and materials. The conflict in Ukraine has also led to higher commodity prices, pushing up inflation around the world.

Ministers are facing pressure to postpone the reduction in support for energy bills in April, given the impact on cost of living pressures and that it may push more households into fuel poverty. Fuel poverty has been a massive issue across the UK over the past year, especially over the recent winter period. Fuel poverty is when a household is unable to afford to heat (or cool) their home to an adequate temperature, with low income and high fuel prices being two of the driving factors.

According to statistics, the estimated number of households affected by fuel poverty across the UK from 1 April 2023 is expected to be in excess of 8 million households, with 7.39 million (30.3%) of households recorded as spending more than 10% of their income on energy bills in 2022. Average household energy bills have been increasing since a low in 2020. They currently stand at 102% more expensive than in winter 2020/21 and are set to be 188% more expensive in April. So, it is no wonder that the predictions of the number of households that will be in fuel poverty is set to rise to over 8 million.

The government stepped in to help all households across the UK over the winter, with a scheme that saw everyone receiving a total of £400 towards their energy bills, spread out between October 2022 and March 2023. While this helped with the rising energy costs for many, it wasn’t as plain sailing as the scheme was hoping to be. Many customers who were on prepayment meters had difficulty accessing the support, and some who did not have a direct domestic electricity supplier were unable to access the support until recently, at the end of February 2023.

As well as some financial support, both the government and energy firms have been encouraging households to save energy where possible, which may have saved people a few pounds here and there. Turning off lights, spending less time in online casinos, playing video games, watching Netflix, and even avoiding the tumble dryer have been just some of the suggestions households have been recommended. There have also been incentives to use less energy. Octopus, for example, began paying customers who used less power at peak times.

With the reduction in direct support still expected to end, the government has said they will provide those who are vulnerable with a cost-of-living payment in spring. However, there are concerns this won’t be enough, with many experts in the field calling for Jeremy Hunt, the Chancellor, to stop the latest rise in EPG, believing that the Chancellor could afford to do so.

The government has also promised to invest heavily in domestic-based energy sources, including nuclear power, renewables and some continued fossil fuel extraction. They believe that working towards this overarching goal of cheaper wholesale energy will mean the country will be powering Britain from Britain, which in turn will increase their energy security and independence. They also believe that this will be better for our planet.

While this may all look good for the future, it doesn’t help those in need right now. Only time will tell what the Chancellor and the Secretary of State for the Department for Energy Security will do about the current crisis, and what energy bills may look like for the people of Britain going forward.