Good morning.
August is coming to an end and as the days begin to get shorter and temperatures start to drop, many people are paying closer to attention to their energy bills, particularly those who struggled last winter. They may be pleased to hear that Ofgem has lowered its price cap by about 7%, from £2,074 to £1,923 for the average household. It should be cause to celebrate, even if the decrease is relatively slim. However, the news will probably be of little comfort for millions of people who could still end up paying extraordinary sums. How could that be? The government has rolled back its financial support that proved to be a lifeline for many last winter.
Bills remain considerably higher than before the energy crisis began, and experts predict that the cap will rise slightly again in the first quarter of 2024. To understand what the new price cap means in real terms, I spoke to Peter Smith, National Energy Action’s (NEA) director of policy and advocacy.
In depth: ‘The situation for millions of households is still incredibly desperate’
Last winter, 13m households tried to save on bills by not turning their heating on in cold weather, according to a Which? survey, and 10,000 homes a month were being pushed on to prepayment metres because of unaffordable bills, even with the £400 universal rebate scheme and the energy price guarantee. Without these safety nets, campaign groups and charities are worried that those in low-income and vulnerable households will suffer.
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Why has the price cap fallen?
The announcement by Ofgem comes after wholesale energy prices fell to their lowest levels since December 2021, a welcome relief after 18 months of high energy prices. Russia’s invasion of Ukraine turbocharged already rising gas prices to unprecedented levels. Last summer, there were reports that the average household on a dual tariff and direct debit could face as much as £5,000 in annual bills. (In the end it peaked at £4,279.)
The reason the price cap will fall is largely a result of international markets diversifying their sources of energy after the reduction of Russian gas to mainland Europe and the UK after the outbreak of the war in Ukraine, Smith says. Unfortunately, the cap is still considerably higher than it was before the energy crisis began and is unlikely to help households in real terms all that much. “The situation for millions of households is still incredibly desperate,” says Smith. “When the price cap takes effect in October, we estimate that 6.3m UK households will be living in fuel poverty. That’s 2m more [than] at the start of this crisis.”
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Will the price cap make much of a difference?
The average household that is paying by direct debit should be seeing a fall of about £150 a year in their bills, however, as the government has withdrawn its financial support over the course of the summer, millions of households could end up paying more than they did last winter. This is particularly concerning as record numbers of households already have significant energy debt as they head into the colder months. “They’re going to be carrying that financial burden as they try to pay off their existing usage at the same time,” Smith says.
Then there are standing charges, the fixed daily amount on your bill, which have increased significantly in recent years. They are expected to rise to more than £300. According to the NEA, standing charges for the typical customer have increased by two-thirds since the introduction of the 2019 Ofgem price cap as a way for energy companies to recover costs.
So even though energy bills will be cheaper than last winter, they remain unaffordable, especially as the cost of other basic essentials including rents, mortgages and food are higher than ever. Inevitably, the poorest families will be the worst affected.
“Often this results in households cutting back on essentials to the detriment of their health. People are now much more commonly sacrificing heating, as it is sadly increasingly seen as a luxury,” Smith adds. Alongside the human cost, there is a broader societal impact when people are forced into fuel poverty because of the strain it causes on health and social care services, he explains: “People are much more likely to spend longer in hospitals or are more likely to get sent back to the hospital. It creates a huge burden on the NHS.” In 2019, before the energy crisis began, the NHS is estimated to have spent £2.5bn on treating illnesses connected to damp and cold. Experts have said that rising fuel poverty levels will lead to a public health emergency that could be prevented.
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Are there any alternatives?
The point of the energy price cap is not to keep bills affordable for consumers – it is designed to limit the profits of energy companies. Even Ofgem’s chief executive has questioned whether the price control mechanism is adequate, pushing the government to rethink the “very broad and crude” framework. Jonathan Brearley added that the price cap made sense in a more stable market, but the volatility of the current market has rendered it less effective.
Charities, campaign groups, experts and even some energy suppliers are calling on the government to create a social energy tariff, a discounted energy bill targeted at low-income and vulnerable households. Smith says that social tariffs existed in the 2000s on a voluntary basis; he attributes its limited success to the fact that it was not well targeted. “We believe it would be possible to learn from those previous mistakes,” he says. The NEA argues that this tariff must be additional to existing protections.
The government has announced that it is “developing a new approach” to protect customers from rising bills, but have seemingly abandoned any pledges to put a social tariff in place.
The chancellor, Jeremy Hunt, will consider a social tariff for energy bills in the autumn statement, although he made a similar pledge last year.
As households wait for the government to take action, people will continue to resort to desperate coping strategies to survive: “Last week we saw increased concern by fire and rescue services as people resort to other ways of heating their homes. A person set fire to furniture to heat his home. A pensioner used a disposable barbecue so they did not [need to] switch on their oven,” Smith says. This is why change is necessary, he says. “People are doing things that are ruinous to their long-term health and that put their lives at risk to survive.”
What else we’ve been reading
It is a fact universally acknowledged that the only people who read articles about how to get better sleep are those who struggle with it. But what if it’s too late? Ellie Violet Bramley rounds up expert opinions on how to cope with sleep deprivation. Craille Maguire Gillies, production editor, newsletters
After four weeks, the Edinburgh fringe is officially over. Rachael Healy spoke to performers and producers about how the second year post-Covid went. Nimo
Can you put ice in your wine? (Yes, hooray!) What is low-intervention wine? (A hipster thing.) Master of wine Jancis Robinson answers these and 119 other questions about wine in a wholly bookmarkable FT piece (£) for everyone who finds wine confusing. Craille
Artist Hani Hape has attempted to flip the script by re-creating photographer Helmut Newton’s infamous sexualised female nudes with male subjects. It is an interesting exercise that sparks discussion, Katy Hessel writes, but sexism cannot be “solved by simply flipping something on its head”. Nimo
Harvard’s Amy Edmondson isn’t the first person to ask if failure could be something to learn from, but she makes a persuasive case for seeing it as a source of personal development in this week’s essay for the big idea. Craille
The front pages
The Guardian leads with an exclusive: “Rivers at risk as Gove rips up rules on new housing”. The Mirror reports on the closure of train ticket offices with “Axe will hit elderly and disabled”.
“Thousands stranded in air traffic control chaos”, says the Times, the first in a number of headlines on yesterday’s airport issues. The Telegraph has “Chaos all week as air traffic control fails”, while the i says “Travel chaos to last for days as air traffic failure grounds flights”.
The Mail warns “Flights fiasco to go on for days”, while the Financial Times says “Travellers braced for more delays after air traffic fault brings holiday turmoil”. Finally the Sun simply leads with the full page headline “Get me out of air!”
Today in Focus
The final weeks of Yevgeny Prigozhin
Last week, a plane carrying the Russian mercenary leader Yevgeny Prigozhin crashed; the Kremlin confirmed that the Wagner boss was among the dead. The Guardian’s Russian affairs reporter, Pjotr Sauer, tells Michael Safi how Prigozhin did not lie low in the final months of his life but continued to criticise the war in Ukraine and to run his lucrative business in Africa. Yet behind the scenes there are signs the Kremlin may have been silently working to ensure his financial and political power could be transferred to the state.
Cartoon of the day | Henny Beaumont
The Upside
A bit of good news to remind you that the world’s not all bad
As a child, Fiona Allen fell in love with drama. More than half a century later, she seized the chance to live her dream at the age of 72 after she discovered mumming – an ancient masked form, in which actors (usually male) travelled through villages, performing simple plays, often in exchange for food or shelter. She’s since founded the Meadows Mummers, a female-only group who perform all over Scotland. “I thought it would be fun to feminise something that was traditionally performed by men.”
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