Energy bills to rise by £219 million – but Ofgem plans radical reforms

energy bills



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This summer, millions of households in the UK will see their energy bills rise by an average of £150. With 125 fixed-term energy deals coming to an end, almost 1.5 million homes will be affected by price hikes, unless they move to a new fixed-term tariff.

If these households don’t make the switch to a new fixed-term tariff – which is usually much cheaper than the standard variable tariff customers are placed on when their current fixed deal ends – then the collective increase in price across the UK will be £219 million.

As a result, all customers are advised to check their energy bills to see whether their current deal is coming to an end. If it is, it’s a good idea to run an energy comparison now, and switch to the best energy deal in your area.

Ofgem proposals

Although energy bills are set to rise for over one million households across the UK this summer, watchdog Ofgem has unveiled plans to help improve Britain’s energy infrastructure. These could save households around £20 a year on their gas and electricity bills.

The scheme will not be introduced until next year, but the five-year programme will see an investment of £25 billion that will “transform Britain’s energy networks to deliver emissions-free green energy”.

Under the proposals, money will be pumped into upgrading the existing gas and electricity networks, including those run by National Grid. In addition to this, a further £10 billion will be spent to help energy networks deliver more clean energy for consumers.

As well as this, a new Strategic Innovation Fund – along with funding to individual companies for network innovations – will provide £630 million to help drive research and development in green energy projects.

Much of this investment has been designed to help lower energy costs for customers. When announcing the plans, Ofgem said it would be “pushing companies to be much more efficient in how they run themselves” and also asking that they significantly cut the amount they pay to shareholders in dividends.

As a result, the regulator believes the proposals would almost halve company earnings, which could potentially save households around £3.3 billion. Currently, around a quarter of the average consumer’s energy bill goes towards paying for the network.

A final decision on the proposals will be made in December, after network companies have had the opportunity to feed back. If you’d like to see the proposals in full, then you can view them on the Ofgem website.

July 31, 2020
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