Tariff Watch: The hidden costs in your energy bill

The Warm This Winter coalition has launched its second  Tariff Watch report, which shows the hidden costs in your energy bill.‍

What is Tariff Watch?

Produced in partnership with Future Energy Associates (FEA) it highlights how our broken energy system prioritises profit over people’s ability to heat their homes. 

It shows urgent government action is needed to introduce tariff reforms which could bring down bills and help people stay warm this winter.

What do I need to know?

• 13% (£242) of customers energy bills are made up of suppliers’ operating costs
• Operating costs include, TV adverts, sponsoring Premier League football teams and posh offices 
• Energy firms spend almost as much on marketing (c.11% of operating costs), as they do on operating customer contact centres (c.12% of operating costs).
• Suppliers are now expected to make an additional £140m in profit on the nation’s energy bills over the next 12 months, thanks to changes to the Ofgem price cap which came into force on 1 October. 
• The new rules mean that firms now make an average £64.70 profit per customer per year, up by £4.70 per customer.

What should energy customers do?

• Think carefully and always check the small print for unit rates, standing charges and exit fees.
• Remain vigilant to deals and flash offers which come along and, crucially, look at the unit rates and standing charges. If the standing charge is below 53 p/day for electricity and 30 p/day for gas and the unit charge is below 27 p/kWh for electric and 7 p/kWh for gas, then it is worth considering fixing before the price cap changes again in January. 
• There are now 337 fixed price tariffs that are more expensive than the current Ofgem price cap, but with an average exit fee of £138, many households will feel trapped into remaining on tariffs which now represent a bad deal.

What can we take away from this?

Britain’s broken energy system continues to inflict misery on homes across the country with increased standing charges and profits hurting consumers while rewarding the energy firms.

Without fundamental overhaul of the energy grid and energy tariffs, households will continue to lose out while suppliers will profit.

Customers should not be subsidising fancy headquarters, entertaining and marketing when these companies are making billions. That money should be used to end energy debt and lower bills.

But instead, for millions of households, this winter will be even WORSE than the last, because while energy bills are dropping slightly, prices are still nearly double what they were and without any additional support. 

Indeed, with the Government now halting work to improve the energy efficiency of buildings, Britain’s households risk being trapped in cold damp homes for years to come.

It is time that Rishi Sunak proved his government was really on our side and delivered this support.

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Simon Francis, from the End Fuel Poverty Coalition, commented:

“Britain’s broken energy system continues to inflict misery on homes across the country with increased standing charges and profits hurting consumers while rewarding the energy firms. 

“It’s galling to think that our energy bills are so high because energy firms spend as much on sponsoring Premier League football teams and expensive TV adverts as they do on customer service. 

“But while households suffer, the Government sits on its hands and refuses to introduce tariff reforms which could bring down bills and help people stay warm this winter.

“Indeed with the Prime Minister halting work to improve the energy efficiency of buildings, Britain’s households will be trapped in cold damp homes for years to come.”

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Fi Waters, spokesperson for the Warm This Winter campaign, had this to say:

“Energy firms spending £242 per customer on operating costs adds insult to injury for UK households struggling to stay warm this winter.

Customers should not be subsidising fancy headquarters, entertaining and marketing when these companies are making billions. That money should be used to end energy debt and lower bills.

It’s yet another example of our broken energy system which the government and energy firms seem to be in denial about.”

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You can read the full report here.