Energy Price Cap Increase Forcing Even More Islanders Into Poverty

Ofgem, is the UK’s energy regulator. It has announced, 3rd February 2022, an increase from 1 April for approximately 22 million customers.

Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year (difference due to rounding). Prepayment customers will see an increase of £708 from £1,309 to £2,017.  (Ofgem)

With people in Orkney increasingly having to choose between heating and eating this is yet another blow to islanders in keeping their homes at a tolerable level of warmth.

Dr Harriet Thomson on the University of Birmingham is an award-winning interdisciplinary academic with world leading expertise in energy research and social science. 

Commenting on how this price cap rise will affect people she said:

“This news comes at a time when families across Great Britain have already been facing years of rapidly increasing energy prices, as well as chaotic energy market conditions with the collapse of around 20 energy supplies since January 2021 alone. Just last month, ONS data found that 2 in 3 adults said their costs of living had gone up in the past month, with 79% of those attributing blame to gas and electricity prices.

“We know from the extensive body of existing evidence on this topic that lower income households will be disproportionately hit by the price cap increase, risking pushing millions more into a situation fuel poverty.

“This will have serious consequences for physical and mental health, social isolation, and educational attainment, with households forced to make difficult everyday decisions over whether to ‘heat or eat’.  

“Moreover, these price increases are likely to push more people into using risky and/or polluting alternative energy sources, such as DIY candle heaters that have been linked to house fires, burning scrap wood and other flammable materials, and digging up peat. As well as the obvious risks to human life, these approaches will also exacerbate climate change.

“It’s clear that energy companies are reeling from the potent combination of cash flow reductions due to pandemic-related economic pressures on families who are building up more energy debt, and the global gas crisis. But the answer is not to burden households with yet more costs.

“The energy market is broken and needs radical reform – now is the time for the UK government to show ambition and commitment to the nation by investing in deep retrofits of our old and leaky housing stock, and to rollout decentralised renewable energy systems at scale.”

Friends of the Earth Scotland also commented on the UK’s broken energy system which sees the places which produce over 100% or renewable energy like Orkney also paying the highest prices to heat their homes and businesses.

The campaigning organisation stated that the 54% increase in the energy price cap, due to rising global gas prices takes place at the same time that oil giant Shell announced $19.3 billion (£14.5b) in profits for 2021 – including $6.4billion (£4.7b) in the last 3 months alone. Earlier this week, Exxon said that they had made $23 (£16.9b) billion in profit in 2021.

Friends of the Earth Scotland’s Just Transition Campaigner Ryan Morrison said:

“People will be enraged to watch companies like Shell and Exxon celebrating billions in profit as the energy price rise is expected to push millions more homes into fuel poverty and forcing people to choose between heating and eating.”

“The UK’s energy system is fundamentally broken. Today is clear evidence that it doesn’t work for people or the planet. Oil company bosses are being allowed to profit from climate breakdown and the gas price crisis on the back of widespread misery for people around the world.”

“Instead of allowing these companies to cause social and environmental devastation for their own pocket, we need to overhaul our energy system to end our dependence on oil and gas. It’s time to rapidly scale up investment in renewables and energy efficiency while winding down fossil fuel production. A just transition will not be realised while profit obsessed fossil companies call the shots.”

Commenting on the price hike Jonathan Brearley, chief executive of Ofgem, said:

“We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can.

“The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas. 

“Ofgem is working to stabilise the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future.”

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