Ofgem’s energy price cap – increasing to £3,549 per year for dual fuel for an average household from 1 October – was widely forecast. We knew it was coming. That doesn’t make the actual announcement any easier to bear.
Amid the fast approaching horror, it’s worth remembering why the cap was introduced. It had become clear poorer customers were getting fleeced. Those forced to feed coins into prepayment meters were particular hard done by.
The cap – an adaptation of a policy initially floated by Labour and widely derided by the Tories and their allies at the time – was designed to protect them and other poorer households from getting ripped off through being unwilling or unable to navigate a treacherous and malfunctioning market. It’s scarcely credible, but Ofgem still likes to use the phrase “protected by the cap” in its missives.
At £3,459 per year, something like four times the level it was at last year, going into the winter it now offers all the protection of a paper wall with a ravenous Bengal tiger on the other side. The energy industry, on the other hand, has good solid bricks to keep it safe.
Ofgem lost one of its directors – the redoubtable Christine Farnish – who said in a leaked memo that it had given “too much benefit to companies at the expense of consumer”. She was right. The cap is now more the industry’s friend than it is the consumer’s. Just how much of a friend will become clear in January.
It seems to me that someone at the watchdog is alive to this sort of criticism, because it decided to throw consumers a bone: “Ofgem has also today strengthened the rules around direct debits to ensure suppliers set them at the right level, meaning that customers only pay exactly what they need to,” it has trumpeted online. “The changes will stop suppliers from building up excessive customer credit balances and using them in a risky way as working capital.”
That’ll be a real comfort when the cap is pushing £5,000 next year. It’s like pouring a little Dettol into that same bloody tiger’s bite.
Ofgem didn’t seem to want to say anything about five grand. Oh, no. The market, you see, remains “too volatile” to predict. All the watchdog would allow is that it’s going to get significantly worse. So we’re left with the sages at Cornwall Insight, whose crystal balls have been clearer than most as regards the future.
The consultancy is currently forecasting that the cap will rise to £4,649.72 in the New Year and then a chilling (quite literally) £5,341.08 three months further on. National Energy Action, the charity, reckons 8.9m UK households will be in fuel poverty from October, almost double the figure for the previous year, which at 4.5m was already too damn high when looked at thought the lens of a conscience. God only knows what that number will look like in January.
A conscience is something the members of the current government – in fact, the ruling party as a whole, given the tenor of its leadership debates – seems to be lacking. The energy crisis has barely merited a mention. Tax cuts for the rich seem to be the priority.
Ofgem did get one thing right today – its CEO Jonathan Brearly said the new prime minister (so, Liz Truss) will “need to act further to tackle the impact of the price rises that are coming in October and next year”.
Does she even realise that there is a crisis? “Asleep at the wheel,” said the GMB union of the government. Others have said much the same thing. Bozza has been holidaying and partying – and the rest of them have been shamelessly politicking and jockeying for influence with their party engaged in a protracted exercise of gazing at its own navel.
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Labour, meanwhile, has proposed what it calls a “fully funded” price freeze to keep the cold at bay. Shadow Chancellor Rachel Reeves has been out and about taking about it. She was a smart choice for the job given that she does empathy, and does it a lot better than Labour’s leader Keir Starmer.
One of the problems for the Labour Party is that it has tended to reflect the views of its activists back to the country, whereas the Tories have done better at keying into what a sufficiently large part of it is thinking to command a majority in parliament.
That may have changed, which would I suppose be one consolation from this awful mess. But as consolations go, it’s thin gruel because people are going to freeze and they’re going to go hungry. The vital equipment used by disabled people isn’t going to get powered, as I wrote here.
People are going to die, just as Martin Lewis has warned. The FT recently opined that a £100bn plan to freeze prices, put forward by Scottish Power, was too pricey. The sums needed to cushion the blow are indeed eye-popping.
But here’s the thing: the costs of not acting will be far, far higher. Thanks to the paralysis in Whitehall, we may yet see some of those costs playing out before our eyes. It will not be pretty.