Energy bills could rise before expected October cap rise as 65,000 back Gordon Brown emergency budget call

·6-min read
Energy bills could rise before expected October cap rise as 65,000 back Gordon Brown emergency budget call
Energy bills could rise before expected October cap rise as 65,000 back Gordon Brown emergency budget call

Energy bills could rise in advance of an expected increase in October, the UK's energy market regulator has said.

Ofgem and industry body Energy UK said it was "possible" for suppliers to raise customers' direct debits before the new cap on energy prices kicks in.

Any rises would be to help spread the cost of higher energy use in the winter months, Ofgem said.

The Chancellor has said he will challenge energy bosses to do more to help their customers cope with soaring prices at a crunch meeting today.

Nadhim Zahawi acknowledged that more is needed to be done to help people with the spike in the cost of living ahead of winter, but suggested that rolling blackouts were unlikely.

It comes as MoneySavingExpert.com founder Martin Lewis said soaring energy bills were creating a "national crisis" on the same level as the Covid pandemic.

Around 1.5m Scots households saw their energy bills soar by up to £693 a year after Ofgem hiked the price cap by the biggest increase yet in April. From April 1, the three in four customers on default tariffs paying by direct debit saw an increase of £693 from £1,277 to £1971.

Respected analysts Cornwall Insight warned that the cost of gas and electricity for a typical household will rise to £4200 a year this January - £650 pounds more than they previously estimated.

In a new dire new outlook for households the analysis say that bills are set to soar to around £3,582 in October before the New Year rise. That is over £200 a year more than its previous forecast.

Ofgem said direct debits are usually charged in a way so that customers build up "credit" during the warmer summer months when usage is lower, to spread out the cost of using more energy in the colder months.

"It's therefore possible for direct debits to increase ahead of a price cap rise or even when a customer's use has remained constant," an Ofgem spokesperson said.

HeraldScotland: Changes to the price cap come as household energy bills are likely to remain at more than two-and-a-half times their pre-crisis levels until at least 2024, according to latest predictions. Cornwall Insight, one of the country’s most respected energy
HeraldScotland: Changes to the price cap come as household energy bills are likely to remain at more than two-and-a-half times their pre-crisis levels until at least 2024, according to latest predictions. Cornwall Insight, one of the country’s most respected energy

However, Ofgem said customers can ask for their excess credit to be "returned at any time and can contact their suppliers to change how their direct debit is spread".

"For example, they pay for exactly what they used in that month and do not build up a credit ahead of winter," Ofgem said.

Energy UK, the trade body for the energy industry, said direct debits were "reviewed periodically" with suppliers taking into account factors including estimated usage, current tariffs, debit/credit balances and recent meter reads.

"It is, therefore, possible some customers' direct debts will change in advance of October," a statement said.

Mr Zahawi and business Kwasi Kwarteng will today (Thursday) ask today gas and electricity utilities company executives to submit a breakdown of expected profits and payouts as well as investment plans for the next three years.

Leaked Government documents have warned a “reasonable worst-case scenario” could see outages for homes and businesses in January if there is a combination of below-average temperatures and a drop in gas imports, according to reports.

Mr Zahawi told reporters: “I think it’s important we all get round the table, I will continue to do the work I need to do as Chancellor, but I also want to challenge them, to say are you making the investment? How can you help your customers? What more can we do together? That’s the reason for the meeting.”

He also said: “What I want to do tomorrow is understand better how they’re committed to that investment in gas, because whatever happens we need energy security and we’ve got a strong strategy that Kwasi and I will continue to push hard.

“The other area I want to look at is some of the energy producers, if you look at the renewable energy producers, the amount that they get paid is linked to gas prices.

HeraldScotland: File photo dated 04/09/21 of the Ofgem sign on the regulator's office in central London. Energy regulator Ofgem is to blame for part of a massive hike in energy bills, experts have said, as they forecast the price cap would hit more than 4,200 in
HeraldScotland: File photo dated 04/09/21 of the Ofgem sign on the regulator's office in central London. Energy regulator Ofgem is to blame for part of a massive hike in energy bills, experts have said, as they forecast the price cap would hit more than 4,200 in

“So, they haven’t changed anything they’re doing, they haven’t had any increase in their input costs at all, but they’re getting a much higher return because of the unusually high gas price because of Putin."

Mr Lewis said according to forecasts, the price cap - the maximum amount suppliers can charge customers in England, Scotland and Wales for each unit of energy - would effectively double between May of this year and October.

He said ultimately it was "government alone" which could help by putting "more money into people's pockets".

He said: "This is a national crisis on the scale that we saw in the pandemic. "

The chief secretary to the Treasury said that the Government is working up a fresh package of cost-of-living support for the next prime minister to consider when they take office.

Simon Clarke argued it is “absolutely right” for the new leader to consider “these options in the round” when they take the reins, suggesting they should steer clear of announcing “new uncosted policies” during the election period.

It comes after frontrunner Liz Truss – who has Mr Clarke’s backing – hit out at “bizarre” proposals to agree help for rising energy bills with the Government and her rival Rishi Sunak before the contest is over.

Meanwhile nearly 50,000 people have signed a petition backing former Prime Minister Gordon Brown’s call for an emergency budget to tackle the cost-of-living crisis.

Campaign group 38 Degrees said that within 24 hours of going live, tens of thousands of people from across the UK had signed.

Last night there were nearly 65,000 signatures.

The petition says: “The Government raised Universal Credit during the pandemic – providing a lifeline to millions – and with enough pressure, they could do it again.”

The former prime minister has been joined by metro mayors, anti-poverty groups, and faith leaders from across the country in demanding urgent Government action on Universal Credit and support for families.

Mr Brown said: “People are being asked to bear an unbearable burden of unpayable bills at a time when so many are under pressure.”

With concerns mounting over the cost-of-living crisis, questions have been raised over any immediate cross-Government action to tackle energy price hikes.

Tony Danker, director general of the Confederation of British Industry (CBI), has said that the Prime Minister and the two contenders to replace him should “come together to agree a common pledge to support people and help quell fears”.

But education secretary James Cleverly said it is “not in the hands” of Ms Truss or her campaign team to “truncate” the process of agreeing extra help.

“In order to bring about changes to tax systems or to financial support systems, we need to have votes in the House, that needs to go through a proper scrutiny process,” he said.

“It is not as simple as recalling Parliament to have an emergency debate on something like military action, which is a very simple one-question yes or no answer.”