What does Ofgem's new Pricing Frequency mean for households?
Ofgem issued press release on the 4th August 2022 in which they unilaterally announced that their response to the climate of increasing energy cost brought about primarily by the impact of the conflict in Ukraine has been to allow energy companies to update (ie. increase) their prices on a quarterly basis as opposed to the old frequency which was every 6 months.
What is happening?
The best metaphor for this situation is the old parable about boiling a frog in a pot of water. If you throw a frog into a pot of already-boiling water it will immediately jump out because the change in temperature is beyond it's range of tolerance. However, if you put the frog in a pot of cold water and slowly heat it to boiling the frog will stay in the pot and allow itself to be boiled to death. In this scenario, bill payers (ie. all of us) are the proverbial frog and really have no recourse to complain since the majority of our energy suppliers are owned by foreign companies with no stake in our economy's growth or success, their primary motivation is to generate profit for their shareholders which they are doing at record levels.
In fact 5 of the top 6 energy companies are foreign owned, EDF is a subsidiary of a French Government-owned energy company, E.ON is a German company, NPower is a subsidiary of a German company, Scottish Power is a subsidiary of a Spanish company and SSE is an Australian company. Searching for examples of foreign-owned companies prioritising the welfare of citizens in the foreign markets they operate in over the returns they generate for their shareholders is a fruitless exercise.
What does this mean for me?
According to Ofgem, this change is being made to "provide stability needed in the energy market, reducing the risk of further large-scale supplier failures which cause huge disruption and push up costs for consumers. It is not in anyone's interests for more suppliers to fail and exit the market."
Effectively this means that the cost of energy bills, in the current economic climate, will be increasing every four months as opposed to every six months, because the regulator wishes to protect the economic interests of the suppliers who are making massive profits.
This makes it imperative that homes with EPC ratings of D and below (use this free tool to check your EPC rating ) try to arrange for measures to be installed to increase the energy efficiency of the home. Unfortunately, the amount of savings generated by taking measures such as roof insulation or installing a new more efficient boiler will be multiplied as the costs of energy bills increase!