Support a Social Enterprise – Buy our Spag Bol or Cake!

Fuel Debt Advice Bulletin

All credit for the information should go to the good people at NEA for supplying this vital information about energy pricing. We hope to use our website to spread the message to help new and old visitors to our website.

This edition of the Bulletin summarises some of the key topics affecting the provision of fuel debt advice and
highlights help available for frontline workers / householders.
The contents include;
• Energy Price Increases
• Energy Price Cap
• Energy Switching Figures – January 2019
• Energy Suppliers Ceased Trading

Energy Price Increases
E.ON, EDF Energy, British Gas and Scottishpower have announced a price rise of
10% in February 2019, which will come into effect on 1 April 2019. Two of the big six
suppliers are increasing prices in reaction to the energy price cap rise announced on
7 February 2019.

The big six, which account for three-quarters of the UK energy market, had priced on average £4 below the
initial cap of £1,137, which started on 1 January 2019 and it looks as though they will be doing something
similar when the next price cap comes into force on the 1st April 2019.

The expectation is that the other four of the big six as well as medium and small energy suppliers will follow
E.ON’s and EDF Energy’s lead during February, as suppliers have to give 30 days’ notice of price increases
and will probably average a 10% rise.

Figures show that since January 2018 to date – 32 energy providers had rolled out 55 price increases, whilst
some of the big six had put up tariffs twice last year.

Energy Price Cap
From 1 April, the levels of the default tariff price cap will increase by £117 and the pre-payment meter cap by
£106 to reflect higher costs.

Customers on default deals are still better off – Ofgem analysis suggests that without the default tariff cap they
could be overcharged by £75-£100 a year.

The price cap for customers on default (including standard variable) tariffs, introduced on 1 January 2019, will
increase by £117 to £1,254 per year from 1 April for the six-month “summer” price cap period. The price cap for
pre-payment meter customers will increase by £106 to £1,242 per year for the same period.

Ofgem adjusts the level of the caps twice a year to reflect the estimated costs of supplying electricity and gas to
homes for the next six-month period. Ofgem will reset the level of the cap in August for the six-month winter
price cap period which begins on 1st October.

Capped prices only increase when the underlying cost of energy increases. Equally when costs fall, consumer
bills are cut as suppliers are prevented from keeping prices higher for longer than necessary.

The caps will continue to ensure that the 15 million households protected pay a fair price for their energy
because the rises announced reflect a genuine increase in underlying energy costs rather than supplier
profiteering.

When the default tariff price cap was introduced on 1 January, suppliers were forced to scrap excess charges of
£76 per year on average per default tariff customer and the cap stops this overcharging from returning.

Ofgem analysis suggests that default tariff customers could be paying around £75 to £100 a year more on
average for their energy had the default tariff cap not been introduced, even after the recent increase.

Around £74 of the £117 increase in the default tariff cap is due to higher wholesale energy costs, which makes
up over a third (£521) of the overall cap. Higher wholesale energy costs have similarly pushed up the level of
the pre-payment meter cap.

Last year higher oil prices, amongst other factors like the higher demand for gas for heating during the ‘beast
from the east’, led to a rise in wholesale gas prices. Due to the importance of gas as a source of electricity
generation, this also led to higher wholesale electricity prices.

The regulator’s Chief Executive, Dermot Nolan, said “We can assure these customers that they remain
protected from being overcharged for their energy and that these increases are only due to actual rises in
energy costs, rather than excess charges from supplier profiteering,”.

The regulator said its analysis suggested without the cap people would be “paying significantly more even after
the increase” of the cap in April.

Ofgem do stress that, although households are paying a fair price due to the caps, many could still save more
money on their energy bills by switching to a better deal.

Electricity Switching Figures – January 2019
There was some concern that the increase in the price cap could unravel Ofgem’s work in
recent years to persuade people to switch suppliers. Ofgem itself predicted the number of
people switching could fall by a third after the cap was implemented.

Consultants KPMG reported in September, warning that “if consumers on SVTs believe the price cap is
protecting them from excessive prices, they may not seek out a better value deal and engage in the market.”
However, switching figures recently published by Energy UK show that nearly 400,000 customers switched in
January 2019.

Energy UK’s latest electricity switching figures reveal that nearly 400,000 (382,665) customers switched in
January – up 5 percent on January 2018.

2018 was a record year for switching with over 5.8 million – or one in five – customers making a move.
Millions of customers will also have switched to a better deal with their current supplier.

The latest figures also show that in January just over 100,000 customers switched to small and mid-tier
suppliers.

In January 2019, of all switches:
❖ 40% were from larger to small and mid-tier suppliers
❖ 12% were from small and mid-tier to larger suppliers
❖ 21% were between larger suppliers
❖ 27% were between small and mid-tier suppliers
Energy Suppliers Ceased Trading
There were a number of energy suppliers that ceased trading in 2018 which included:
Future Energy, Iresa, Usio, Spark Energy, Extra Energy, One Select and GEN4U (with
over half a million households temporarily without an energy supplier).

In the first month of 2019, Economy Energy and Our Power have ceased trading,
leaving over 265,000 households without an energy supplier.

Back in 2004 there were only 13 energy suppliers operating in the energy market which increased to 73 by June
2018.

There is some concern that this trend of energy suppliers ceasing to trade may continue, however the Ofgem
Safety Net contains a list of FAQ’s relating to what a householder should do in the event that their current
supplier ceasing trading. (Ofgem are also looking into tightening the conditions of issuing a license that allows a
company to operate as a supplier.)

In summary, Ofgem’s advice is to “sit tight” – take a meter reading, do not switch supplier, wait for the new
supplier to make contact.

The full list of FAQ’s can be accessed at Ofgem Safety Net . Some of the more common FAQs include:
Will my supply be cut off?

Your energy supply won’t be disrupted. In fact, you won’t notice any change other than a new supplier being
appointed for you.

Who will choose my new supplier?

Ofgem will choose your new supplier following a competitive process designed to get the best deal for you.
When will I know who the new supplier is and the date I’ll be switched to them?

Ofgem will make a decision on a new supplier as soon as possible and will announce these details on their
website.

They will ask suppliers to bid to become the new supplier so they can try and get the best possible deal for you
in the circumstances.

You will be moved onto a new contract with the new supplier. It should only take a few days to appoint a new
supplier.

Will I be on a different contract with my new supplier?

Yes. Your old tariff will end.

Instead, your new supplier will put you onto a special ‘deemed’ contract (this means a contract you haven’t
chosen). This contract will last for as long as you want it to.

Will my bills go up?

Your new supplier will put you onto a special ‘deemed’ contract (this means a contract you haven’t chosen).
This contract will last for as long as you want it to.

Your bills may go up, as ‘deemed’ contracts can be more expensive. But Ofgem will try to get the best possible
deal for you, if you’re in this situation.

Once you have been contacted by the supplier you should ask them to put you on their cheapest deal
or shop around for another supplier if you are not happy with them as a supplier. You won’t be charged
exit fees.

Published On: 6th March 2019

Tags: , , , ,