Advice to Domestic Customers (Homeowners)

 

As the existential energy crisis continues, it is not only businesses that are being hit hard, but more Domestic customers (homeowners) will be facing financial hardship than ever before.

What is the price cap?

The energy price cap Is calculated by Ofgem (the office of gas and electricity markets) to protect domestic customers from essentially being ripped off by suppliers making too much profit. Despite this, the price cap has to reflect the current energy market, therefore with the current state it is in, the price cap is also very high, much higher than what is feasible for a huge proportion of households.

The price cap increased in April this year and it is estimated to double again in October. More people are struggling with their bills than ever before: A quarter of households owe approximately £200 which is 3 times higher than September last year. There is no realistic way these people will be able to cope with the further increase later this year.

Why are my bills going up? 

You may have heard of the price cap by why are energy bills increase in the first place? There are several contributing factors to the increase, all of which have unfortunately occurred simultaneously:

  • The demand for gas worldwide has increased. Following the pandemic, wholesale prices increased to make their money back.
  • The northern hemisphere particularly increased the demand due to the cold winter they endured.
  • The conflict in the Ukraine and Russia as Russia has put the main gas pipeline on hold. To explain this further, for many years, the UK have imported gas supplies from Central Europe and Russia and since 2010, our dependency on gas reserves and import levels reduced due to innovative ways of creating renewable sources of power. Despite the level of gas imported directly from Russia being approximately 5% of our overall use, a further 42% of gas is imported from Europe, with many of their supply chains coming from Russia. This makes the UK more dependent on the Russian gas market to supply our demands. Therefore, the ongoing conflict between Russia and Ukraine indirectly affects our supply.
  • In the UK many unstable energy suppliers have gone out of business which forced many people to switch supplier and take on new and expensive tariffs as a result
Will the government help? 

In May, earlier this year the government declared a support package to aid all households in the UK which includes an energy bill discount of £400. They also outline further support for low-income households; an additional £650 to help them ease the increase the cost of living.

Our Recommendations:
  • Monitor your usage; it has become apparent that many suppliers are raising customers DD payments either in anticipation of increased use or to back pay debts. Review your bills from the same period last year and check for any unexplained readings. Contact your supplier if you believe the new DD amount is wrong or too much.
    If your supplier tells you that you are going to consume more in the winter – simply budget for this yourself and explain you only wish to pay for what you are using. Being in credit with your energy supplier actually allows them to make more money by holding your credit due to these funds accruing interest.
  • Take meter readings; understanding energy prices is not as difficult as it seems, simply read your meter on day 1 of the month and then again on the last day of the month. Deduct the reading on day 1 from the reading on the last day, then multiply this number by your unit rate listed on your bill, if you have a standing charge, also add this by the number of days in the month. This should give an estimated monthly spend.
  • Request a smart meter; although the deadline for all homes in the UK having a smart meter installed has passed, there are still thousands without one. Your supplier will supply this free of charge
  • Avoid standby mode; ensure all plug sockets are turned off in between uses, although your TV may not be on, the plug can still receive surges of electricity, this electricity passes through your meter and is chargeable.

If you have questions and want a no-obligation discussion, get in touch today.