Our energy prices are ever increasing. The energy price guarantee is staying put but the energy cap is rising.
But what does this all mean for us in 2023 and beyond? Are we getting a good deal here or could we invest in something which makes a positive difference to our wallets, our conscience and our world?
Since the Government’s Autumn statement in November 2022, the UK seems to have breathed a collective sigh of relief that the Energy Price Guarantee will remain in place until April 2024. As a recap, the Energy Price Guarantee is a temporary measure initiated by the Government to help shield consumers from significant increases in wholesale gas prices, exacerbated by the Ukraine war. As summarised by Ofgem:
The Energy Price Guarantee protects consumers by reducing the unit cost of electricity and gas so that that a typical dual fuel direct debit bill for January 2023 remains at £2,500 and will be increased from April 2023 to a new level of £3000….
The level is based on typical use for an average household and is a cap on energy unit price not a cap on total bills. For an individual customer, the amount they will pay under the Energy Price Guarantee varies depending on how much energy they use, where they live, and how they pay for their energy.
Separate to this, Ofgem already has a price cap that it requires the energy suppliers, such as British Gas and E.O, to adhere to for customers. Note, this does not apply to oil and gas producers.
The price cap is a cap on a unit of gas and electricity, with standing charges taken into account. It is also not a cap on customers’ overall energy bills, which will still rise or fall in line with their energy consumption. Ofgem reviews the cap every 3 months. The next quarterly price cap update will be on 27 February 2023. As it stands, the Ofgem price cap is set at £4,279 for an average dual fuel household paying by direct debit based on typical consumption.
So the Energy Price Guarantee ensures that consumers will pay less for their energy than they would under the price cap. At least for as long as the Energy Price Guarantee lasts.
However, who pays for all this?
In May 2022 the UK Government enacted the Energy (Oil and Gas) Profits Levy to help offset the exceptionally high profits that oil and gas companies have been benefiting from recently, but without taking any of the commensurate risk. This graph from the Guardian gives you an idea of the kind of money we’re talking about.
Compare this to the estimated amount that the Levy is supposed to bring in for 2022/23 (we can’t know how long the Government intends to keep the Levy going for so it makes sense just to look at the first year):
Just over £1bn. A number ordinarily not to be sneezed at but still pales in comparison to the incredible profits we’re seeing being made by the oil and gas companies (and the electricity companies too as much of our electricity in the UK is generated by gas).
Now compare this to how much the government believes the Energy Price Guarantee will cost – £25bn in the first 6 months and £13bn in 2023/24. https://commonslibrary.parliament.uk/research-briefings/cbp-9491/
In fairness, the oil and gas and electricity producers still have to pay corporation tax outside of this “windfall” Levy. However, as the government tells us itself, receipts from these businesses (North Sea oil and gas) only amounted to £3.1bn in 2021/22. https://commonslibrary.parliament.uk/research-briefings/sn00341/
Doing the rough maths, it’s starting to sound like it’s you and me that will be footing most of the bill for these “benefits” – and probably our children too.
So making the following assumptions:
£3,500 per year x 10 years = £35,000 energy costs.
£13,000 over 10 years = £1,300 a year, not taking into account the money you can make by selling your generated electricity back to the grid.
Makes for a very compelling case for solar I think.
If you would like a free quote, please don’t hesitate to get in touch! We’d be delighted to help you meet your energy goals.