Millions Of Households On Economy 7 Tariff Face Energy Bill Increases Of 8pc Next Month

23rd December 2022

From Money Saving Expert.

Households on Economy 7 tariffs will see substantial price hikes in January due to the upcoming changes to the energy price cap and the subsequent rate changes under the Government's energy price guarantee. Below we explain why and what you can do about it.

Energy prices are set to change slightly for everyone in January due to the way regulator Ofgem sets the energy price cap, which is rising by 20% in January to £4,279/year for a typical household. This changes every three months and underpins the energy price guarantee, which provides a discount on those rates, bringing typical bills down to £2,500/year until April 2023, with the Government offsetting the difference.

However, the price guarantee is a flat rate - currently set at 17 pence per kilowatt hour for electricity (rising to 31.8p/kWh in January) and 4.2p/kWh for gas (6.4p/kWh from January) - but Ofgem's price cap varies considerably depending on which region you're in, how you pay and if you're on a time-of use-tariff, so all households are seeing varying changes to the rates they pay.

How much are rates rising by and why?
For most, the change will be trivial, ranging between 0.8% and 1.4% on average, depending on how you pay. But for those on an Economy 7 tariff, where you pay two different rates for your electricity depending on when you use it (you pay more during the day, less overnight), the changes are much more substantial.

We've heard from numerous MoneySavers on Economy 7 that have been told prices are increasing by as much as 11% on average. Due to the way Economy 7 prices are set, it's difficult to say exactly how much prices are rising for all on average. However, from the rates we've seen from suppliers, increases of about £100/year are possible based on typical use, depending which region you're in.

These higher increases are due to the fact that Economy 7 customers get exactly the same level of discount as all other energy customers, despite Ofgem increasing the underlying rates for Economy 7 much more than standard meters. According to the regulator, this is because its "assessment of the costs of supplying those customers has increased more than direct debit dual-fuel customers".

Octopus Energy told customers the increase was "bonkers" and explained Ofgem's calculation for the price cap is different as it "takes into account that Economy 7 homes are more likely to heat their homes and hot water with electricity" - and it's electricity prices that are massively high right now.

Read the full article at Money Saving Expert