By Charlotte Webster–
A new petition to boycott energy bill payments is gathering pace in the U.K, in the wake of a forthcoming 80% price hike.
The grassroots Don’t Pay movement is aiming to amass 1 million supporters who will cancel their direct debit payments to energy companies by Oct. 1, when household bills are set to skyrocket.
Only last Friday, Britain’s energy regulator announced it will raise its main cap on consumer energy bills to an average £3,549 from £1,971 a year, as campaign groups, think tanks and politicians call on the government to tackle a cost-of-living- crisis.
The increase comes as Ofgem’s CEO warns of the hardship energy prices will cause this winter and urges the incoming Prime Minister and new cabinet to provide an additional and urgent response to continued surging energy prices. Low gas storage levels and a drop in pipeline imports from Russia following its invasion of Ukraine has also inflated electricity prices.
Campaign organizers say supporters will enact their pledge if a total of 1 million signatures are amassed before the October deadline.
The Uk government has condemned the movement as irresponsible, warning that it could cost consumers even more money in late payments. The new price cap level is based on a transparent methodology and calculations by Ofgem. The data is published on the Default tariff cap level: 1 October 2022 to 31 December 2022 publication.
The price cap limits the standard charge energy suppliers bill domestic customers for their combined electricity and gas bill in England, Scotland and Wales, but is recalculated by Ofgem throughout the year to reflect wholesale market prices and other industry costs.
The cap does not apply in Northern Ireland, given the flexibility suppliers have to increase prices at any point after getting approval from a different regulator. The increase reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.
The price cap reflects a ceiling per unit price on energy costs to buy energy on the wholesale market and supply it to our homes. It also sets a strict and modest profit rate that suppliers can make from domestic energy sales. However, unlike energy producers and extractors, most domestic suppliers are currently not making a profit
Earlier this month, Ofgem announced plans to recalculate the cap every three months rather than every six months to reflect current market volatility.
Consultancy Cornwall Insight have predicted the cap could rise to £4,649.72 in the first quarter of 2023 and to £5,341.08 in the second quarter before coming down slightly to £4,767.97 in the third quarter.
In July, the government announced it would pay a £400 grant to all households over six months from October to help with bills, with an additional £650 one-off payment going to 8 million vulnerable households. Some suppliers have also announced support packages for customers.
The idea has faced wide criticism for failing to address the scale of the problem, which has been compared with the Covid-19 pandemic and the 2008 financial crash in terms of its impact on the population.
“A catastrophe is coming this winter as soaring energy bills risk causing serious physical and financial damage to families across Britain,” said Jonny Marshall, senior economist at the Resolution Foundation think tank, ahead of the announcement.
“We are on course for thousands to see their energy cut off entirely, while millions will be unable to pay bills and build up unmanageable arrears.”
Several strategies for tackling the crisis have been put forward by politicians, consultancies and suppliers themselves.
New prime minister, Liz Truss, has spoken of the need to provide additional support for households and businesses but said no decision will be made until the new prime minister is elected on Sept. 5.
Truss plans to use tax cuts to reduce pressure on households, reversing the recent increase in national insurance tax and suspending the green energy levy on bills.
Freezing the price cap at its current lower level is one of the options available to policy makers, but energy suppliers believe it will need to be financed through a government-overseen funding package in order to prevent destabilization of the industry.
Scotland’s first minister Nicola Sturgeon recently tweeted: “This rise must be cancelled, with the UK gov and energy companies then agreeing a package to fund the cost of a freeze over a longer period, coupled with fundamental reform of the energy market.”
Jonathan Brearley, chief executive of Ofgem, said any response needed to “match the scale of the crisis we have before us” and involve the regulator, government, industry, NGOs and consumers working together.
“We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make,” Brearley said.
“The Government support package is delivering help right now, but it’s clear the new prime minister will need to act further to tackle the impact of the price rises that are coming in October and next year.
“We are working with ministers, consumer groups and industry on a set of options for the incoming prime minister that will require urgent action.”
“The new prime minister will need to think the unthinkable in terms of the policies needed to get sufficient support to where it’s needed most,” said the Resolution Foundation’s Marshall.
“An innovative social tariff could provide broader targeted support but involves huge delivery challenges, while freezing the price cap gives too much away to those least in need. This problem could be overcome with a solidary tax on high earners – an unthinkable policy in the context of the leadership debates, but a practical solution to the reality facing families this winter.”