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The rising cost of Energy

by | Aug 1, 2022 | Featured, News

With energy costs increasing by record amounts beginning in April, this is a period of worry and frustration for older people, many of whom are already struggling to make ends meet. But why is this taking place? What has the government done in response? And what happens after that? 

What caused this to occur? 

Pent-up demand for energy following COVID-19 lockdowns, as well as broader geopolitical factors, have driven wholesale prices skyrocketing. High pricing has persisted through 2022 and is anticipated to do so until 2023. As a result, Ofgem, the energy market regulator, has announced that the Energy Price Cap will be raised beginning in April. 

The cap operates by limiting how much energy suppliers can charge customers on typical variable tariffs per unit (kWh) of electricity and gas. This limit does not apply to a customer’s overall cost, which varies based on how much energy they use. The cap protects around 22 million consumers. 

The new cap will go into effect on April 1st, representing a 54 percent increase above current costs. Standard variable prices are likely to rise by £693 on average this year. The average increase for individuals who use a prepaid metre will be roughly £708. Customers’ overall yearly price will rise to £1,971, with prepaid customers paying slightly more – roughly £2,017. 

What has the government done in response? 

In response, Rishi Sunak, the Chancellor, has launched three additional support programmes. These programmes are intended to help consumers and complement current programmes such as the Cold Weather Payment and Winter Fuel Payment: 

A £150 Council Tax rebate will be provided to homes in Council Tax categories A-D beginning in April. The government intends to make these payments automatically, and the plan is expected to cover roughly 80% of English homes. Wales, Scotland, and Northern Ireland are not involved in the scheme but should get funds at a proportionately similar amount. 

A £144 million discretionary fund has been proposed to assist those who do not qualify for the Council Tax rebate (e.g. low-income households who do not pay Council Tax or live in properties in higher Council Tax bands). 

Beginning in October, all electricity consumers will receive a £200 credit on their payment. This £200 will then be repaid in £40 instalments added to bills over a five-year period beginning next year. Northern Ireland will be given £150 million to implement a similar programme. 

The government has also announced that suggested enhancements to the Warm Home Discount scheme will be implemented later this year. We supported the Government’s ideas and outlined how the Scheme may help elderly people more effectively. 

What else should be done? 

The new government programmes fall far short of what is required to safeguard senior households from excessive energy bills come April. High energy prices, combined with broader rises in the cost of living, are straining people’s already stretched budgets. These pricing pressures disproportionately affect the elderly, with many living on fixed incomes that just cannot cover the price increases in April. Older adults also have higher heating demands, spend more time at home, and are more susceptible to the impacts of cold weather. 

In the best-case scenario, an older person who qualifies for both the Council Tax and the Energy Bill Rebate will receive £350 this year. However, with costs rising by an average of £693, they still have a £343 gap in their finances, and that’s before factoring in how much bills may climb again in October. We believe that the government should reconsider its strategy and guarantee that support packages better offset the impact of rising energy bills without imposing a long-term burden on consumers. 

Home Help is advocating for more assistance to ensure that older people have the confidence to heat and power their homes. Almost 100,000 individuals signed our letter to the Prime Minister requesting increased financial support, and thousands more have contacted us to share their experiences with rising energy prices. 

Home Help will continue to campaign to ensure that the Government and Ofgem prioritise the well-being of older people. It has never been more crucial for older people to be able to pay to stay warm and healthy at home.