The latest price cap costs, announced by Ofgem on Friday the 26th August, make for grim reading !
Ofgem has announced the energy price cap will increase to £3,549 per year for dual fuel for an average household from 1 October 2022
On the 1st January. 2023, the prediction is that prices will increase 51%, taking it to £5,386.
The average take home pay after tax will average around £2,054 a month in 2023, meaning that energy will cost OVER 2 months salary, nearly 3 months, based on current predictions.
The cap is based on the price that suppliers pay to buy energy which they then sell on to households. This is known as the wholesale energy price, and if the wholesale prices fall, then the cost to the consumers will also fall. Although this is looking less likely, there is still that possibility, and so it's not impossible that the price cap estimates may fall.
Responding to the prediction, Ofgem, the energy regulator, has said: "The wholesale market continues to move extremely quickly so no forecast for next year is at all robust at this stage and will therefore have very limited value, especially for consumers who must always be the main priority", so they aren't currently making any predictions for 2023, or at least not publicly!
So what can we do to minimise these extra costs?
There are things, as an energy consumer, then we can do to be more frugal with our energy consumption, to try and save as much money as humanly possible, some of which are pretty obvious, others may well not have occurred to us, but are likely to save us some money. Here are some of my favourites:
I know it's obvious, I'm going to say it anyway, if you leave a room and nobody is there, turn off the lights! See I told you was obvious, but if your house is anything like my house, then you may well find you go upstairs and see lights flickering like the Las Vegas Strip! Make sure everybody is aware that every light has a cost if you turn it off the cost diminishes, and so the obvious thing to do is to make sure that they're off when not needed!
Lightbulbs - if you are using the more conventional style light bulb, then now is a really good time to give them an upgrade to the more energy-efficient lightbulbs, such as LEDs. These types of lightbulbs use a dramatically smaller amount of energy, which you will notice on your energy bills when you've swapped over. It might cost you a few quid to get the bulbs, but the energy savings will easily out way the initial cost. If you are using outside lights, look at the possibility of changing those to solar lights, which will be free to run.
Turn down your hot water and heating temperature on your boiler, even just turning these down a couple of degrees will make a difference!
Are you heating every single room in your house, and if you are, do you need to? Do you have a spare bedroom perhaps that doesn't get used perhaps, if so turn off the radiator in that room, it's costing you money to heat a room that isn't being used, which isn't being very energy-efficient.
You may want to look at using a Smart Home system, such as Hive or Nest, which will allow you to control your heating externally from the house, via an app, or website. I use Hive and this allows me to keep an eye on the temperature of the house and to turn off the heating, or on, when needed, from anywhere in the world, using the app and easily allows me to put our heating on a timer, so it's only on when we are there and not when we're out and about, therefore I'm not paying to heat an empty house, (the cat can look after itself, after all, it does have fur!)
If you feel cold then instead of instinctively heading for the thermostat to turn it up, put on some additional clothing first, it costs nothing to add an extra jumper or another pair of socks, but does cost money for you to heat your house! Maybe use a blanket or a duvet when you're sitting on the sofa watching TV, this will keep you warm and cosy but won't cost you a penny.
Make sure to use draught excluders if you are noticing cold air coming in from outside. The letterbox is often a problem area. Make sure you close doors around the house to keep the heat and cold where you want it to be and make sure that you close, and tuck your curtains, behind the radiator to ensure that the heat from the radiator is radiating to the room, not the window.
Make sure that your washing machine is full, and you're not just washing a couple of items. It's perfectly reasonable to wash your clothes at 30°, the clothes will still be clean, and you will have reduced your electricity costs.
When it comes to tumble dryers, we all know they cost a fortune to run, and needless to say, if you don't have to use them, don't! There will of course always be a need for these, especially in the middle of winter, but at other times if you can use an outside washing line or put up a drying rack in your house, maybe near a radiator if possible, this will keep the costs down. Cheap dryers are notoriously expensive to run, so if when buying a tumble dryer you have the opportunity to pay a little bit more and get a better-rated machine, then the initial extra cost will definitely be cost-effective, as you will use less energy with a higher rated machine. If you do need to use the tumble dryer, maybe look to only use it for 50% of the drying time. You could use the tumble dryer for the first half of the drying process then remove the clothes and dry them in another way, this will reduce the amount of money you're spending.
If your dishwasher has an eco-mode then make use of it, as this will use less energy, and make sure the dishwasher is full before you actually put it on.
Electricity is cheaper during the night than it is during the day. So if you have the opportunity to run your dishwasher or washing machine during the night, then it makes sense to do so. For safety reasons I personally never recommend using the tumble dryer during the night, or when you're not in the house. Without sounding alarmist, I have had friends who have had a fire in the tumble dryer, running overnight, and this caused a lot of damage, and could have been a lot worse if they hadn't woken up.
Turn off your TV and equipment at the plug when not in use. Keeping something on standby can actually be expensive and is simply wasting energy!
In the kitchen you can save money as well, measure the amount of water are you putting into a kettle. I think we're all guilty of just turning on the tap and filling up the kettle to boil when in actual fact we are probably adding far more water than we are actually going to use, so if you're making a cup of tea simply measure out one cup of water and put that into the kettle, not only will it save electricity and save water, it will also boil faster as well! It can cost up to a pound a day to boil water for your cup of tea, depending on how much you drink, so maybe make use of a thermos, boil a kettle of water and fill the thermos with it, then use this water to make your brew, as this means you're only heating the water once, and the thermos will keep the water hot for ages.
When it comes to cooking, gas it's actually cheaper than electricity to use. Therefore try and make use of gas appliances such as your hob for cooking, as this will give you an overall saving. It's definitely worth using a slow cooker where possible as it's dramatically cheaper to run power, (up to 90% cheaper), plus you have the added bonus of a slow cooker being great for cooking cheaper cuts of meat, which will save you money by not spending as much at the supermarket!
Invest in a vegetable steamer. Not the electric ones, the traditional style, as that way you can cook your veggies using just one pan, and more importantly one gas burner, which will most certainly save you money.
Once you've used your oven to cook something, then as long as health and safety allows for it, (no kids running around), then leave the oven door open, as the heat from the oven will help heat the house, and means you are not wasting all the hot air you have paid for it to produce!
I know that most recipes will tell you to preheat your oven, but that's really not necessary unless you're baking cakes or pastries. Preheating your oven uses energy for nothing, so there is no reason why you can't put food into a cold oven and allow it to warm up at the same time as the oven, it may actually cook faster, but will most certainly be cheaper!
I hadn't thought of this, but it makes perfect sense, always use the lid on a saucepan! It really does speed up the heating process, meaning you're not wasting energy heating something up for an excessive amount of time.
If you only cooking something small in the oven look at adding something else as well at the same time. Jacket potatoes are an excellent option, you can cook those today and then reheat them for dinner tomorrow, meaning you are saving an entire cooking cycles worth of energy, plus it also saves you time for tomorrow night's dinner and is a cheap dinner too!
Ask yourself if you really need to iron those clothes! I'm sure we're all looking for an excuse not to have to do the ironing, but actually, it's a lot more cost-effective not to iron your clothes unless you absolutely have to.
Check to see if you are eligible for a warm home discount. This could save you £140 a year on your energy bills, you can check online to see if you are eligible.
These tips are pretty basic, none of these are going to have. massive impact on the price increases, but they will all add up over time and help save you at least some money. There are some things you can't control, such as the standing charge for your gas/electricity, but you can control your usage and that's the key, you just need to be more aware of how you are spending your energy costs and do everything you can to reduce those.
We await what the new Prime minister and his/her cabinet come up with to attempt to help out UK households with the cost of living crisis, the final days of Boris Johnson's leadership, have included a meeting with energy bosses, however no further measures or deals have been agreed, but with only days to go before before leaving, that's probably not the fault of Boris, it would be potentially pointless announcing new measures, when these are likley to changed by the incoming new leader and their team..
Here's what the energy companies profit and loss books look like, (compiled by Sky News):
British Gas
Operating profit fell by 43% at British Gas in the first six months of 2022, hitting £98m during the period. That is £6 per customer after tax.
However, its owner Centrica did considerably better and adjusted operating profit reached £1.3bn, up from just £262m a year earlier.
Centrica will be forced to pay a windfall tax on the profits it gets from the North Sea part of the business.
E.on
In the first six months of the year, the business made adjusted earnings before interest and tax (Ebit) of €289m (£245m) in the UK, up 77% on the year before.
EDF Energy
The company made earnings before interest, tax, depreciation, and amortisation of €860m (£728m) in the UK in the first six months of this year.
It was a rise of more than 200% compared to the €267m (£226m) in the same period a year ago.
Octopus Energy
Octopus Energy is a privately owned energy company, so only releases its results annually.
The company's last set of numbers show it managed to halve operating losses from £63m to £31m in the year ending 30 April 2021. It took a £150m hit to help customers through the energy crisis.
ScottishPower
In the first six months of 2022, pre-tax and depreciation, it made £924.6m – a rise of 2.6%. Most of that was thanks to a jump in the money its wind turbines and other renewable generation made from selling electricity.
The company's retail business, which sells energy to customers, made £54.3m in Ebitda over the period, a reduction of 60%.
The figures are a pretty good reason why many are suggesting that we re-nationalise the UK energy distribution, not unlike the E.on system in France, where prices have increased only by the smallest of margins...