The official stage for October’s vitality value cap has been confirmed at £3,549 for the common dwelling – an extra enormous rise on already excessive costs.
I’ve written this to share what I do know, together with notes on Authorities help and all the things we’re doing to assist individuals put together for it as finest we will.
Make no mistake, it is a fossil gasoline disaster. As a direct results of Putin’s invasion of Ukraine, world fuel costs are astronomical — presently round eight occasions greater than typical. And due to the way in which the UK’s vitality system works, the worth of electrical energy (even renewable electrical energy) is essentially set by the worth of fuel. I’ve spoken extra about this right here. This wants to alter — a evaluate is underway, however it will not change issues rapidly sufficient to deal with the disaster.
Fuel costs have been like this for nearly a 12 months now, however because the vitality value cap is predicated on previous wholesale prices, the worst of those rises haven’t but handed on to clients.
It’s October when this influence will actually hit payments.
Our group assist round 30,000 clients a day and we all know what it will imply. There’s some authorities help, particularly for many who want it most, however much more is required.
We now have spent the final 12 months working with different firms and specialists to deliver concepts to the regulator and authorities which we hope they are going to implement. However time is working out and till we hear what the federal government may do, we wish to assist our clients put together. We have lately up to date our on-line Stability Forecast device with “Crystal Ball mode”. This reveals clients on our Versatile Octopus tariff the influence of probably value modifications and elements within the authorities rebates already introduced. Whereas it could possibly’t be absolutely correct, it ought to hopefully present some perspective.
Up to now, Octopus have absorbed over £150m of will increase, to maintain our prices decrease for current clients, however we merely cannot soak up all of it. Placing it in perspective — in a traditional 12 months, we would normally pay £1.5bn for the gasoline we provide to clients. This 12 months it is extra like £9bn. There’s extra about this under — however to be clear, our primary precedence is supporting our clients.
No vitality provider can clear up this downside — this is not an {industry} subject, it is a consequence of warfare. That is why we have been calling on authorities assist for all clients, no matter who their provider is.
October’s Value Cap in context and Authorities help presently out there
- The value cap is £3,549 for a typical dwelling. That is 80% greater than the identical time final 12 months and effectively over twice what it was final winter. Particulars in regards to the value cap right here.
- In Could the federal government introduced £400 help per family, which is able to cut back the influence of the October rise to about 50% greater than present costs. This may take the type of an computerized month-to-month credit score of £66 or £67 between October and March for all electrical energy clients, and the place acceptable, an computerized discount in your month-to-month funds. You need not apply for this and we are going to go it on routinely — we’ll additionally present a approach for anybody who needs to donate their credit to those that want it extra to take action.
- Many low-income households obtained £326 on to their financial institution accounts (normally marked “DWP Value of Residing”) in July, with a second cost of £324 due within the autumn.
- These on tax credit will even obtain £650, however have to attend till autumn for his or her first cost of £326, adopted by a second cost in winter
- Anybody receiving incapacity advantages will routinely obtain £150 in September — this will likely be along with the £650 cost the place related.
- These on a pension will obtain an extra £300 winter gasoline cost
We communicate to 140,000 clients every week — greater than we ever have — and know first hand the stress and fear that is already inflicting, and the way many individuals face real difficulties in paying this winter.
Nevertheless it’s clear, given the dimensions of the issue, that solely the federal government can present ample assist to make a large enough distinction. In impact, Putin has weaponised vitality — and it is proper that the federal government helps with this. We do count on extra help and can proceed to place concepts to the federal government. For a few of our ideas, learn the questions on the finish of this e-mail.
Except the federal government intervenes, here is the anticipated occasions for the approaching weeks:
- Sep sixth: New Prime Minister takes workplace
- Sep thirteenth: Octopus begins sending personalised messages together with your tariff and estimated particulars (it will take a number of days)
- Sep seventeenth: Octopus begins updating direct debit (these will likely be delivered to these affected over time, primarily based on account standing and normally you possibly can alter them in case you suppose we’re fallacious)
- September thirtieth – October sixth: You’ll be able to ship us a meter studying at any time — if you would like to submit one for the altering costs you are able to do that proper up till October sixth. On-line is finest — you are able to do it on-line in seconds.
- October 1st: New value cap comes into impact
In case you are having issue paying, head to this web page to search out out in regards to the help out there and the right way to entry it. You are at all times welcome to contact us, however we will likely be busy — very busy. We do not use error-prone “voice recognition”, countless “push button menu” programs or irritating chatbots. Whether or not you e-mail or name, you will take care of actual individuals who’re right here to assist and experiencing the identical difficulties as everybody else.
Throughout these occasions our group will likely be stretched — despite the fact that we have recruited and educated many new group members — so bear in mind you possibly can replace your funds, see your payments, check out your steadiness forecast, or transfer home all out of your on-line account, and doing so will liberate our group to assist those that want it most.
This isn’t the kind of data anybody welcomes, however I hope it’s useful. Thanks on your time — when you’ve got a second, I would recognize your ideas on this replace and the disaster — this easiest way is through this very fast survey.
Lastly, a phrase about our group. It is not simple being on both finish of calls in the meanwhile, and I would prefer to say thanks to the huge, overwhelming majority of shoppers who’ve been so considerate and have proven such understanding to our group throughout these occasions. It makes an enormous distinction and lets us make use of individuals who actually care — thanks.
What’s induced this?
After the lockdowns around the globe, world provide chains suffered from shortages, pushing costs up. However Putin’s invasion of Ukraine despatched fuel costs skyrocketing to unprecedented ranges and so they’ve solely received worse.
The place’s the cash going?
Put merely, oil and fuel extractors. While the price of extracting fuel hasn’t elevated, the worldwide shortages have elevated costs from 60p/therm to £4.80/ therm. To place it in perspective – the UK normally spends £11bn shopping for the fuel to ship to properties, and to generate electrical energy for them. This 12 months that is extra like £51bn.
Why is renewable electrical energy costlier?
The UK has a single wholesale value for electrical energy — whether or not renewable or not. Certainly, renewable electrical energy prices extra as a result of we have to pay for certificates on prime of the wholesale value. That is bonkers and we’ve ceaselessly known as for reform. This will likely occur however not in time for this 12 months.
What may the federal government do?
We had been happy when the federal government introduced its current help package deal in Could, however since then costs have escalated and meaning the package deal is a whole lot of kilos much less efficient than it was initially meant to be. And with January costs more likely to be dramatically greater nonetheless, it is clear that the present help package deal just isn’t sufficient.
While there are lots of concepts, Octopus agrees with different vitality firms that the most effective plan is to freeze the worth across the current cap stage. This could be paid for by an industry-wide fund. We’ll weblog particulars shortly, however in brief — whereas wholesale costs are greater, firms use the fund to ship the worth freeze and when wholesale costs drop, firms pay again into the fund. This could see costs at present ranges for 2-4 years, after which fall over the following decade – particularly as low cost renewables come on-line and market reform passes the financial savings to clients. Crucially, it will additionally cut back inflation by about 3.5%, serving to cut back different prices throughout the financial system.
Certainly the federal government cannot help vitality payments perpetually?
Completely proper. The markets count on world fuel costs to come back again down in two-ish years, or sooner if the warfare in Ukraine resolves. It’s because proper now, fuel storage is being elevated and provide chains are being constructed and re-routed globally in order that the UK and Europe get extra dependable and resilient entry to fuel.
On the similar time, renewable initiatives are being accelerated within the UK and throughout Europe, and electrical energy markets will likely be reformed to assist deliver electrical energy costs down through cheaper renewables. The long-term pondering within the plans we suggest helps soak up the risky and excessive market costs within the brief time period after which deliver costs down as fuel and electrical energy markets enhance. We do not want magic cash, we’d like shock absorbers and market reform.
Are costs going up extra within the UK than in Europe?
Wholesale costs are very related throughout Europe however authorities response varies by nation.
This very clear Reuters article is an efficient abstract of the variations in authorities actions by nation.
Is there hope?
Sure. The value freeze proposal would stabilise costs while we get long-term options in place. After which costs will drift right down to not rather more than half present ranges over the following decade. We are going to proceed to work extraordinarily exhausting with the remainder of the {industry}, authorities and different organisation to attempt to make this – or various options – a actuality.