So, unless you’ve been living under a rock for the past year – or somewhere else off the National Grid – you’ve probably noticed that your Energy Bill has increased to an absolutely insane level recently.
And it’s not just you – it’s everyone across the country – with households now reporting that their energy bills are set to double, and even triple, from last year.
People are already dealing with a huge ‘cost of living crisis’ – with food prices rising dramatically, inflation running rampant, and wages that basically haven’t risen since before the financial crisis – and now, soaring energy bills really are just about the last thing anybody needs.
And yet, whilst other countries around the world responded to rocketing global energy prices proactively – by implementing policies to actually protect their citizens from shouldering the burden of extra costs – the UK government has barely acted, and Brits are understandably getting extremely concerned, whilst the extra costs look set to plunge millions more into poverty, or even worse.
So what’s really going on?
What’s actually causing UK Energy Bills to soar? Why isn’t the government doing more to ensure ordinary people don’t have to foot the bill? And how can we change things to ensure this kind of crisis never happens again?
How much are UK Energy Bills rising?
The Energy Price Cap
When speaking about Energy Bills in the UK, it’s necessary to understand exactly what the Energy Price Cap is.
The Energy Price Cap was introduced in January 2019, with the aim of stopping private Energy Suppliers from making excessive profits by charging customers – mainly those on default tariffs extortionate prices for their energy.
The Cap is set by the Energy Regulator, Ofgem, and it’s updated twice a year – at the start of April and the beginning of October.
Ofgem calculates the Cap based on a range of costs incurred by Energy Suppliers – such as the global wholesale cost of energy, network maintenance costs, and the costs of government energy policies such as green levies and the Warm Home Discount – and the Cap can both increase or decrease depending on the estimated total of these costs.
In addition, Ofgem’s Energy Price Cap also allows private Energy Suppliers to mark up their prices by a certain percentage so that they can turn a profit – a figure which is currently set at 1.9%.
The overall Energy Price Cap figure represents how much an average household, with a typical energy usage, can expect to pay in total for their gas and electricity over the course of a year.
Ofgem also sets three separate Energy Price Caps, which vary slightly based on how much it costs Energy Suppliers to process different forms of payment method.
But, for the sake of convenience, as the Monthly Direct Debit Energy Price Cap is by far the most commonly used, we will focus on that one for this video.
As of April 2021, the Energy Price Cap was £1,138 – meaning that a typical UK household could expect to pay this amount for an annual dual fuel bill.
However, six months later, in response to rising global wholesale gas prices, Ofgem announced that they would be raising the Energy Price Cap by another £139, a 9% increase to £1,277.
And in April this year, they raised it again! But this time, by much more – almost £700, a 54% increase on October 2021, from £1,277 to a whopping £1,971.
This represents a total annual rise of £833 for a typical household – an increase of 73% compared to just a year ago.
Evolve Research
Given the fact that these price rises have only just come in, it’s currently impossible to calculate just how badly they’re going to affect ordinary people in practice.
However, in making this video, we asked our followers for examples of how much their own energy bills are about to increase, based on the official estimates provided to them by their Energy Suppliers.
We received a big response, and the general consensus was a near 100% rise on bills compared to 2021 – with price increases appearing to vary very little across different suppliers.
One E.ON customer, Steven, reported that his bill was going to virtually triple – going from £136 a month to £362 after April.
Whilst Maggie, a Utility Warehouse customer, reported a rise in her electricity bill of 99% – from £51 a month to £101.41.
And one Octopus Energy Customer, Laura – who lives in a 3-bed ground floor flat – has just received an estimate essentially doubling her total annual energy bill to around £5,800.
And these responses were typical amongst the numerous replies that we received – meaning that, in the coming months, the vast majority of Brits are almost certainly going to be receiving some truly eye-watering energy bills.
But it’s not just domestic households being affected either.
We received another response, from Ben, who helps run a village pub, reporting that their business Energy Supplier had quoted them a staggering 750% increase for their annual electricity bill – from £4,700 to nearly £34,000.
After shopping around, Ben told us that the best deal they could possibly find was a fixed tariff deal with Scottish Power, for £13,500 a year – a figure which still represents a rise of 175% from last year.
And, if you thought things were bad enough already, these rises could just be the tip of the iceberg – with experts predicting that things could get even worse, and that the Energy Price Cap could even top a staggering £3,200 next October.
Why are UK Energy Bills rising so much?
There are a large number of factors causing UK Energy Bills to rise.
However, there are two main ones:
Global wholesale gas prices have soared more than 400% since the start of 2021 The UK is one of the most gas-dependent countries in EuropeWhy are global wholesale gas prices soaring?
During the height of the pandemic, strict lockdown measures saw global demand for energy slow to an unprecedentedly low level.
And, as global storage facilities started to fill to the brim, extraction and production across the globe was reduced dramatically.
However, as restrictions began to be eased in 2021, economies around the world bounced back far quicker than expected, and renewed gas production didn ’t keep up with the pace – leading to huge demand and low supply.
This dire situation was then compounded by a number of other factors:
A bitter winter in the northern hemisphere, which increased demand for gas heating A hot summer in Asia, which increased energy demand for air-conditioning A relatively windless summer in Europe, which depleted levels of stored wind energy A drought in Brazil, which depleted levels of stored hydroelectric energyAnd now, just to make the situation even worse, Russia – the world’s largest exporter of natural gas – are acting like utter bellends in Ukraine, leading to yet more frenzy in the gas market.
Why is the UK so reliant on natural gas for domestic energy?
Despite decades of calls to phase out fossil fuels in favour of renewables, the UK is still one of the most gas-reliant countries in Europe – with 85% of UK homes still heated by gas central heating, and around 40% of all UK electricity still produced by burning it.
In comparison:
Around 2% of Sweden’s energy is produced from gas Around 15% of France’s energy is produced from gas Around 22% of Germany’s energy is produced from gas And, for the European Union as a whole, gas accounts for just 22% of overall energy productionWhilst over the last few decades the UK has almost entirely phased out its use of coal power plants, it has also failed to make up the shortfall with either renewable capacity or any other source – and gas still leads wind as the UK’s number one source of overall energy production.
In addition, over the same period, the UK also hugely scaled back its own domestic gas production – leading to the UK becoming a huge net importer of natural gas, with almost half of it now being bought from abroad, mainly from Norway, but also around 4% from Russia.
What other factors are causing UK Energy Bills to rise?
Standing Charges
In addition to the hike in the Energy Price Cap, Ofgem has also published updated figures for average Standing Charges.
Standing Charges are controversial because they are a daily fee that Energy Suppliers are allowed to add on to a customer’s bill regardless of how much energy they actually use.
Standing Charges are essentially a fee for being connected to the energy grid – and they ensure that, even if a household does not use any energy at all, they still pay for costs associated with maintenance of the energy network, such as pipes and wires, that it’s connected to.
However, due to the way our privatised Energy System works, Standing Charges also go towards covering the costs of private Energy Suppliers who go bankrupt – costs such as paying off their outstanding debts, and moving their former customers to a different supplier.
Whilst the Energy Price Cap does take into account rising Standing Charges, a total of 31 energy suppliers have gone bust since the beginning of 2021, displacing more than 4.5 million customers and significantly adding to the overall cost of the increasing Energy Price Cap.
And, as a result, the average Standing Charge for Electricity has risen massively, almost doubling from around 25p per day before April, to more than 45p a day now.
What is the UK government doing to help people afford soaring Energy Bills?
The UK government has been widely criticised for its slow response to the Energy Bills crisis – and the policies it has announced to try and address the situation have been broadly slammed as ‘sticking plasters’, which do nothing to address the underlying causes, and which still leave ordinary people – and the most vulnerable – severely out of pocket.
Council Tax Rebate
In February, the government announced that all English households in Council tax bands A-D would receive a £150 rebate in order to help with soaring Energy Bills.
Energy Bill Discount
At the same time, the government also announced that all domestic energy customers in Great Britain would automatically receive a £200 discount on their Energy Bills in the autumn.
However, this discount has been widely criticised because households will have to repay it, and nobody can opt out – with an extra £40 being added to everybody’s Energy Bills over the next five years in order to pay Energy Suppliers back.
Warm Home Discount
In addition, the government has also announced an extension to the Warm Home Discount, which will rise from £140 to £150 in October. The government also claims that eligibility for the scheme will be extended to around 780,000 extra households, although it is currently unclear which households these will be.
Currently around two million households are eligible for the Warm Home Discount – with those on Pension Credit receiving it automatically. Other ‘low income households’ who receive certain benefits could also qualify, but need to apply to their Energy Suppliers in order to receive it.
However, only Energy Suppliers with more than 150,000 customers are currently mandated to take part in the scheme – meaning that many eligible households who buy their energy from smaller suppliers will miss out.
In addition, the government is reportedly set to remove eligibility to the Warm Home Discount to around 200,000 sick and disabled people – those in receipt of Disability Living Allowance (DLA), Personal Independence Payments (PIP) or Attendance Allowance (AA).
Moreover, the costs that Energy Suppliers incur for providing the Warm Home Discount to eligible customers is actually taken into account by the nationwide Energy Price Cap – meaning that those in receipt of the discount are actually still paying for a percentage of the scheme in higher bills.
How will the government’s policies help ordinary people in practice?
Energy Bills are set to rise by £833 a year on average, and even if you are eligible for all three schemes, it will only cut around £500 off your bill in the short term, and just £300 in the longer term – leaving even the most vulnerable people down by around £530 in the long term.
However, the majority of Brits will only be eligible to two of the schemes – the £150 Council Tax Rebate and the repayable £200 Energy Bill discount – leaving the average household out of pocket by almost £700 a year in the long term compared to 2021.
What are the opposition proposing?
The Labour Party have urged the government to go further, by scrapping the 5% VAT on Energy Bills, implementing a one-off windfall tax on the profits of oil and gas companies, and expanding the Warm Home Discount even further.
However, in January, Conservative MPs voted down a Labour motion to scrap VAT on Energy Bills – this despite the fact that Boris Johnson himself endorsed scrapping VAT on energy bills during the 2016 Brexit campaign.
And, more recently, the Prime Minister rejected the idea of a windfall tax, claiming that, if one were implemented, fossil fuel firms would simply “put their prices up yet higher”, causing even higher energy bills for customers.
Labour claim that all three of their measures would cut around £200 off a typical household energy bill in a year.
Yet, even if Labour’s ideas were to be implemented and combined with the government’s policies, the average UK household would still find themselves around £500 a year down in the longer term.
What are other countries doing to help people with soaring energy bills?
Due to the fact that the energy price crisis has largely been caused by a global price spike, countries around the world are also being affected in much the same way as the UK.
However, many nations have introduced policies that go far further than those introduced by the UK government – policies which genuinely protect ordinary people from bearing the brunt of a crisis we did not create and can ill afford right now.
France
In France, for example, President Macron recently announced that electricity price rises were to be capped at just 4%, and that gas price rises would be limited to 12.6%.
In addition, the French government are also giving a €100 rebate to all citizens earning less than €2000 a month in order to help with the increase.
Had Macron’s government not intervened, the people of France would now be facing increased energy bills of around 45%.
When compared to the UK – where the Energy Price Cap has just been raised by 54% – ordinary people in France have clearly been handed a far better deal.
France’s energy sector is largely state-run, with the government holding an 86% stake in the country’s largest energy firm, EDF, which runs 56 nuclear power plants across the country and generates more than 70% of the entire country’s electricity.
Owing to their largely democratically-controlled energy sector, the French government is also able to freely intervene to ensure that energy bills stay low for ordinary people – and it means that any profit generated by EDF is invested back into improving the system, not simply pocketed by private shareholders.
This point was perfectly summed up by Labour MP Grahame Morris at Prime Minister’s Question earlier in March – whose question left Boris Johnson floundering, with the PM basically conceding that the British public were getting such a raw deal precisely because our energy sector is privatised:
https://www.youtube.com/watch?v=GX1Fu8GFxOs
Research has found that the French already enjoyed some of the cheapest energy bills in Europe – whilst Brits continue to suffer some of the most expensive, with the UK ranked fourth behind only Denmark, Germany and the Netherlands.
Other European Countries
Elsewhere in Europe, the government of Spain promised citizens that electcitiy bills would not rise beyond 2018 levels – with Pedro Sanchez’s left-wing coalition introducing several measures including:
Capping gas prices at 4.4% instead of an estimated 28% Cutting VAT on energy from 5.1% to 0.5% A €2.6 billion windfall tax on the excess profits of Energy FirmsWhilst Norway’s government has promised to cover the costs of 80% of every citizens’ energy bill above pre-crisis levels – a scheme which will run until at least March 2023 and which effectively caps extra costs at 20%.
Why isn’t the UK government doing more to help ordinary people?
Britain is already in the grip of an unprecedented cost of living crisis, and the latest statistics show that more than 3 million UK households – over 13% of the entire population – are already in fuel poverty.
Yet, despite this, the UK government’s response to the global energy price hike has been to ignore successful policies implemented by the likes of France, and simply do the bare minimum – inaction which will leave numerous already financially-strained Brits hundreds of pounds out of pocket, and undoubtedly result in many more being pushed over the edge.
So what on earth are Boris Johnson and his government playing at?
Political Ideology
Firstly, in order to understand why certain politicians make the decisions they do, it’s essential to understand the history of the party they represent and the ideology that underpins it.
The Conservative and Unionist Party, to give them their full name, was founded in 1834 as a successor to the Tory Party, during a time in which ordinary people were literally fighting, and winning, to get the vote.
Before this time, only the very rich were allowed a say in who ran the country, and the two main political parties – the Tory Party and the Whigs – only needed to represent the interests of this wealthy elite in order to win votes.
Historically, the Whigs represented the interests of aristocratic families, whilst the Tories represented the interests of the Capitalist class, such as factory owners and landlords.
However, during the early 1800s, ordinary Brits began rising up – they had had enough of the rich literally lording it over them, and fought to force change.
Starting with the Great Reform Act of 1832, Parliament gradually began to allow more and more ordinary people the vote – culminating in the 1928 Representation of the People (Equal Franchise) Act which finally extended the vote to women.
As the franchise slowly began to widen, both the Tory Party and the Whigs were simultaneously forced to expand and popularise their policies in order to appeal to the interests of these newly enfranchised voters – with the Tories rebranding as the Conservative Party, and the Whigs morphing into the Liberal Party, and later the Liberal Democrats.
However, in 1900, after the franchise had been extended to all men, a newcomer party emerged – a party formed out of the growing Trade Union movement in order to represent the interests of ordinary working people: the Labour Party.
From the 1920s until the modern day, Labour and the Conservatives have essentially become the two “main” parties in the UK – with Labour historically representing the interests of the working class and the lower middle class, and the Conservatives representing the interests of the upper middle-class upwards.
This upper-class focus can almost always be used to explain the policies of the Conservative Party – and Boris Johnson’s choice to largely ignore the least well off who will be hit hardest by the energy price spike, whilst simultaneously protecting the interests of wealthy Energy Company shareholders who will make profit from it, is no different.
Priorities
In addition to ideology, politics is also about priorities – and, as you may have come to realise over the last few months, Boris Johnson’s number one priority is, and always has been, himself and his own self-preservation.
Over recent months, Boris Johnson has unquestionably enraged, infuriated and exasperated just about every section of the British public.
From his government’s handling of the pandemic, to widespread corruption and cronyism, to his innumerable lies over Party Gate, Johnson’s poll ratings were plummeting so disastrously that he was seemingly on the verge of being ousted by his own backbenchers.
Yet, with Russia’s illegal invasion of Ukraine now dominating the headlines, the British public are seemingly starting to forget all about Johnson’s incalculable cock ups, and his poll ratings are slowly creeping back up.
However, whilst Johnson is fully aware that public opinion could easily swing against him again very quickly, he has clearly calculated that his government’s lacklustre response to the Energy Bills crisis will suffice enough of the public to see him through, and that any potential backlash would be nothing in comparison to what has gone before it.
If the Energy Bills crisis had the potential to cause anywhere near the kind of political damage to him that Party Gate did, Boris Johnson would unquestionably be prioritising a far better response.
As it is, at this current moment, Johnson feels he’s got enough political capital to prioritise ideology over popularity. However, when people start feeling the pinch, things could easily change, and Johnson could well be forced to take more action.
What should the government do to change the energy system and protect UK households from another Energy Price Crisis?
As explained previously, the main factor driving the Energy Price Crisis is rocketing global gas prices.
However, whilst the UK can’t solve this global crisis on its own, there are loads of things the government could be doing to change our energy sector in order to protect ordinary people from being affected by such price spikes.
Divest away from gas towards renewables
The first and most obvious way to ensure we protect ourselves from global gas price spikes is to simply stop being so reliant on gas.
As explained earlier, the UK is currently one of the most gas-reliant countries in the world – and this means that Brits will see much larger price rises than other comparable countries.
Electricity bills in countries such as Iceland, whose grid is powered almost entirely by renewable energy, have been almost entirely unaffected by soaring global gas prices – and citizens in Iceland continue to enjoy some of the lowest electricity prices in the world.
Not only are renewables far better for the planet, energy from both solar and onshore wind now costs less to produce than energy from any fossil fuel source.
Yet, whilst the UK has increased the percentage of energy it produces from renewable sources to around 40% – up from around 10% a decade ago – the government could easily go far further in speeding up the transition.
In addition, the government could also increase investment in new renewable energy storage technologies – to ensure that when the wind stops blowing or the sun stops shining, we don’t have to fall back on dirty sources such as gas to cover the shortfall.
And, in terms of reducing reliance on gas for domestic central heating, the government could do much more, including:
Speeding up the phasing out of gas boilers Directly funding carbon neutral gas boiler replacements such as heat pumpsThe UK also has some of the oldest housing stock in Europe, with some of the lowest energy efficiency. To solve this, the government could prioritise measures – especially for those on low incomes and in social housing – to fund retrofitting and the installation of insulation and/or double glazing.
And, as for new build housing, the government could easily legislate to ensure all new homes are carbon neutral.
Run energy in the interests of people, not profit
And then there’s the huge problem of who controls our energy sector.
Energy is an essential utility, and we all need it to live. Yet, since the 1990s, the UK government has allowed our energy sector to be run by private companies purely to make profits for their shareholders – rather than in the interests of British people.
As a result, our entire energy network – from the power stations which generate it, to the distribution networks that transport it, to the energy suppliers who sell it – are now all owned and operated by a huge range of private companies, investors, private equity firms, wealthy individuals, and even foreign governments.
Analysis has found that UK energy bills are now around 10-20% more expensive because of privatisation, whilst electricity bills have increased in real terms by around 67% alone since the turn of the century.
Moreover, research analysing the last 30 years also shows that energy bills in countries whose systems are publicly run are typically around 20-30% lower than bills in privately run systems.
Around 60% of Brits think energy should be in public hands, with just 13% of people opposed – and, when you really dig into the details, it’s extremely easy to see why.
Under the UK’s privatised energy system, when profits are plentiful, private Energy Suppliers gladly lap them up. Yet, when times get hard, the government routinely hands these firms public money until they start raking in profit from our bills again.
In addition, a large proportion of the UK’s energy system actually is run by a government – but not our own!
EDF, a state-run French firm, owns and operates all eight of the UK’s operational nuclear power stations, as well as 37 UK onshore wind farms. These activities regularly net the firm 100s of millions of pounds – money that is generated from us through our ever-increasing energy bills, and which ultimately only benefits French taxpayers.
Whilst National Grid PLC, the private firm who own and maintain the national energy transmission infrastructure in England and Wales, as well as the national gas transmission network across Great Britain, are also making huge profits – paying out £1.4 billion in dividends to shareholders just last year.
Whilst research has found that the UK’s regional electricity distribution networks – private firms that own and operate the infrastructure which transmit energy from the national grid into our households – are making the biggest profit margins of any sector in the entire country, paying out a total of £6 billion in dividends to shareholders over the last 5 years.
https://twitter.com/Cmmonwealth/status/1503355217785638914?s=20&t=hLfniuF-HtE6LuoMEyO6hQ
If our energy system was brought back into public hands, these huge sums of money could either be taken off our our bills to begin with, or invested back into the system to make our bills even cheaper in the long run – not simply pocketed by wealthy shareholders.
In addition, a democratically-run energy sector would also allow the UK government to directly intervene in order to ensure energy bills stayed low in the event of any future energy crisis – much like the French government, who control the state-run energy firm EDF, have just done for their citizens.
Implement a permanent Windfall Tax on UK Oil & Gas companies
Despite widespread calls to transition to renewables, the UK government still allows oil and gas companies to extract fossil fuels from within UK territory, and on the UK Continental Shelf (UKCS), mainly the North Sea, where it holds mineral rights.
Since 2010, two of the biggest oil and gas companies have handed out a staggering £147 billion to private shareholders from profits made extracting UK oil and gas – and this year BP and Shell are on course to make a truly staggering combined profit of around £40 billion in 2022, largely off the back of soaring global energy prices.
And all the while, over the past five years, nineteen North Sea Oil companies, including BP and Shell, have actually been net recipients of public money – meaning that the UK government has handed them more public money, mainly in the form of tax breaks, rebates and subsidies, than they have actually paid back into the public purse in taxes! Seriously!
To see just how much UK taxpayers are being screwed over, all you have to do is look at the example set by Norway.
For every barrel of oil that the likes of BP and Shell extract on UK territory, the government collects just $1.72 in tax from them. Whilst in Norway – who have implemented a special 78% rate of tax on the profits of oil and gas companies, and whose oil and gas industry is largely state-controlled – this figure is more than twelve times higher, at $21.35.
As a result of this oil tax, since 1990, Norway has amassed the largest sovereign wealth fund in the entire world, worth an astonishing £1 trillion – or around $250,000 for every citizen – money which is invested and used for projects that benefit the Norwegian people.
Both the UK and Norway began extracting North Sea oil at around the same time in the late 1960s. And since then, both countries have produced similar amounts – meaning that, had the UK government actually taxed oil and gas companies properly, we could also be sitting on a trillion pound wealth fund by now as well.
But that clearly would’ve been too sensible for our governments now wouldn’t it.
Donate to EPTV via other methods
The post WATCH: The Full INFURIATING Truth About Your Soaring Energy Bill appeared first on Evolve Politics.