IMPOTENT fury is the worst kind. When there’s nothing to be done but bang your head off the desk or kick a bin, the most you’ll achieve is a bruised forehead or a broken toe. It’s much more psychologically satisfying to take positive action – any sort of positive action – so I can understand the impulse to join in with the Big Power Off, which saw people across the UK turn off all of their appliances for 10 minutes at 7pm on Sunday to protest at soaring energy prices.
Others aims of the co-ordinated blackout were to put pressure on the government, dent power company profits and potentially cause disruption to the National Grid by creating a subsequent mini-spike in demand. The next switch-off is planned for this Saturday, ahead of MPs returning from recess.
As savings expert Martin Lewis warned that civil unrest could be just around the corner, people feeling outraged about their enormous fuel bills took the opportunity to express it without having to leave their homes – or even go to the trouble of writing a strongly worded letter.
Writing isn’t getting folk very far either, as our letters pages show. Reader Andy Lippok wrote to his supplier asking for plain-English explanations for why his unit price and standing charge were increasing, and received some incomprehensible gibberish in reply. James Ahern even wrote in to offer a £20 donation to charity on behalf of anyone who could make sense of it, but he hasn’t yet had cause to open his wallet. I certainly don’t presume to attempt that task here, or to try to calculate what proportion of the painful price rises can be apportioned to shoddy regulation of the energy sector, short-sighted decisions by politicians, or over-reliance on Russian gas before Putin’s invasion of Ukraine.
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We are where we are and there is, alas, no way to lower our bills. And horrifyingly, it seems the only way for them to go is up.
It’s easy to assume the “Big Six” energy companies are going to be raking it in while we all suffer. After all, they made more than £3 billion in profit in 2020. Surely the enormous price hikes mean they are just picking our pockets even further in order to line those of their shareholders?
If that were the case, you might ask why one or more of the companies don’t simply opt to offer lower prices. After all, the price cap set by Ofgem is just that – a cap, not a mandatory tariff. Wouldn’t it make good business sense to attract thousands of additional customers, even if each one was paying a little less?
Well yes, but it really would be a little. Ofgem has broken down the average dual-fuel bill of £1971 into its component parts to help illustrate how it arrived at the current cap. A whopping £1077 of that is accounted for by wholesale costs, with around £400 for network costs, around £200 for operating costs and another £150 or so for policy costs including energy-efficiency schemes and help for the most vulnerable. Once £94 of VAT and £56 of “other” costs (including Direct Debit admin and meter installations) are taken into account, the energy company’s profit is a grand total of … £35.
If that seems implausible, given the size of the profits mentioned above, bear in mind that not all energy-supplier profit is made from selling gas and electricity to UK customers. According to The Big Issue, these “regulated activities” account for just £800m in profit – equivalent to about £15 from every adult in the UK. Of course, not every household is with a Big-Six supplier, but dozens of smaller challengers have gone bust since the start of last year. Their customers were transferred to “suppliers of last resort” in order to ensure there was no disruption to their supplies. Guess who is helping to foot the £2bn-plus bill for that? All of us.
Would you switch supplier to save £10? £20? The full whack of £35? Would you stay loyal to that company when prices rose again? You might not have the choice, as Ofgem is warning that more suppliers may fail as prices continue to spiral upwards. Big firms failing would mean – you guessed it – yet more big bills. When Bulb collapsed last year it had 1.6m customers, and in an unprecedented move was put into “special administration” to ensure they could all keep their lights on. Nearly £2bn (yes – another £2bn) has been set aside to cover the costs of this.
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All of this means, I fear, that any focus on trying to get energy suppliers to lower our bills is misplaced. Attempts to disrupt the National Grid, if successful, would presumably just add yet more onto future bills. Even individual attempts to economise will have limited impact, thanks to the shocking rise in standing charges.
The job for politicians now is to mitigate against the huge potential harm of the current crisis, focusing on those who risk being pushed to the brink but also softening the blow for those whose custom might be the only thing saving post-pandemic businesses from collapse.
Meanwhile, they must face head-on the task of ensuring short- and long-term energy security for the UK while making the smallest possible contribution to climate change. A difficult job for serious politicians.
If only the UK Government had some of those.
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