Swimming Against The Current – Cap Responds To The Announced Energy Price Cap Increase

“On 6th August the energy regulator, Ofgem, announced the updated energy price cap for the period beginning 1st October 2021. In a recent blog from their CEO, Jonathan Brearley, they explained that consumers are likely to see an increase of at least £150 per year, to the expected cap level. This is being billed as the biggest price rise in a decade, and will put thousands of energy consumers into a position of needing to pay more for their energy use.

“Barely a week after this change kicks in, on the 6th October, the government is scheduled to reduce Universal Credit by £20 per week. In the space of a single week, some energy customers will be hit with both an income and a payment shock at the same time. Now more than ever, in a time when we are supposed to ‘build back better’ we are further weakening the ability of families to stay afloat.

“Contextually, it is important to remember that the price cap does not exist primarily to guarantee consumer affordability; it is offered as a form of protection for those on basic standard variable tariffs. The methodology in calculating the appropriate level depends on a variety of factors, and in this instance, the biggest factor is the wholesale cost of energy supply – something that is on the rise globally and clearly led to this price rise. Naturally, that isn’t something easily controlled, however, it is the end-user that will end up paying for it – all of us.

“The second important thing to remember is that the current price cap doesn’t particularly help the most vulnerable and those on the lowest incomes. The cap exists to protect energy customers from high costs because of high usage, however, it does not provide any protection for customers that are self-rationing and using too little.

“Our 2020 report A dark place revealed that half of CAP clients cannot use the energy they need without worrying about the cost. These are households that are actively using less energy out of fear of how much they have to spend on it. This means that for many families that already ration their usage, things may well become even tighter.  For many customers, especially those in vulnerable circumstances, it’s hard to see where the best solutions to this development will come from. The timing of this price cap increase is also troublesome, and almost certain to drive up consumer anxiety, especially for the winter months.

“Combined with the planned Universal Credit reduction by the government, this delivers a second crippling blow to low-income families in the latter part of 2021. In many ways rising costs such as energy will be the current that is dragging them further out to sea; in need of the lifeline that social security should be there to provide.”

Christians Against Poverty’s Energy Relationship Manager, Paul Walmsley.

Written By; Joseph Beardsall 

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