Hey everyone,
So, for a quick update on whats happening, check out the video below:
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We’re entering a whole new energy system. Ofgem have opened a call for input on the way costs are allocated in our energy bills.
Essentially, they have identified that fixed costs are going to be a HUGE part of our energy bills in the future, and unit costs are going to drop significantly. This could mean we end up with around £900 of standing charges per year, for every house, with unit costs just be a few hundred quid. This would massively disadvantage the low-usage, low income households in the UK, and would create greater wealth inequality. It’s also like to increase the amount of debt in the industry, which has the knock on effect of increasing all of our bills.
So, Ofgem are looking for suggestions on an alternative approach to how energy suppliers can recover costs in the market. They DO NOT have a minded-to position, meaning they aren’t focusing on any particular plan, they’d just really appreciate everyone’s input on what could work.
They do, however, discuss ways other industries bill customers. The examples they use include broadband, which is effectively a fixed monthly cost for each customer of roughly the same amount, but with each customer having the option to pay a little more to get a little more; rail fares are charged based on off-peak and peak times, so the same journey doesn’t cost every the same amount, this could work well in the energy industry as peak time usage is too high and we’re looking to convince consumers to use energy at different times of the day; council tax is essentially charged based on a consumers wealth, with each house being put into bands and tax being assigned based on the value of your home.
These are all alternatives Ofgem are willing to think about, but they want the industry’s and the country’s views on these ideas, as well as input on any other alternatives anyone can think of.
The problem that needs solving is this: how do we split huge fixed costs (predicted £80bn by 2031) amongst consumers in a fair way.
We could actually keep bills as they currently are and just move the new fixed costs onto unit rates, so consumers that use more energy pay more for the maintenance of the network, this is another option Ofgem are considering.
I’ll be reading the call for input properly and giving a response, which I will post here and share with my audience, but it’d be great to hear your thoughts. Use the link at the top of this article to read Ofgem’s document if you want to get ahead of the curve, otherwise please keep an eye out for my emails and I’ll let you know once I’ve read the document and formulated my response.
Thanks everyone, enjoy the rest of your weekend!
Richard Winstone
The Regulator Guy.
Control your bills:
Energy Price Comparison* – Compare, Switch and Save over £250 per year
Car Insurance Price Comparison* – Save up to £523 per year
Broadband Price Comparison* – Broadband from as cheap as £19 per month
Boiler Insurance* with Home Emergency Assist – 35% off – Use code: REGULATORGUY
