Gas and Energy Supply and Prices Crisis
Brian Cuthbertson, Head of Environment and Sustainability, shares information around the current energy crisis.
Parishes like everyone are understandably anxious about the ongoing crisis arising from steep increases in the wholesale price of gas, and possible restrictions of supply.
Comment here is based on the current situation, as it appears in February 2023. Whilst it isn’t possible to foresee all the circumstances that may arise for churches and people, a parish can at any time contact their Area Financial Advisor or the Head of Environment and Sustainability, to discuss the situation and seek more up to date advice.
For more about support on the wider cost of living crisis see The cost of living crisis.
For suggestions on how to save energy, click here to download the document ‘Tips for parishes to save energy and money’.
See also national Church of England guidance at Heating your Church this Winter, and links under ‘More information and advice’ at the foot of this page.
Gas and electricity price relief schemes
Household Energy Price Guarantee
In August 2022, Ofgem announced an increase in the domestic ‘Energy Price Cap’ of about 80%, to take effect on 1 October. Obviously this would have been a severe blow to any household, requiring support for people to get safely through the winter.
In response, the government decided to override the Energy Price Cap with an ‘Energy Price Guarantee’ at an average of £2,500 per year. This was to have been held for 2 years, but following the Chancellor’s Autumn Statement is now to continue from April 2023, for a further year. However, regrettably, the average is to be raised to £3,000 per year.
This ‘ceiling’ on prices is only an approximate level for annual bills for a ‘typical’ household, in an ‘average’ location. It is really a limit on tariff rates and standing charges for gas and electricity; however those limits depend on where you live and how you pay. The rates in London are slightly higher than the average. Households that use more than the average will pay even more.
Confusingly, at the beginning of 2023 suppliers were allowed to make a further adjustment to prices. This seems to have been a small re-balancing between geographical areas. In London, this resulted in a very tiny change.
The real cost of energy is currently falling, meaning that when Ofgem next reviews the Energy Price Cap, that is likely to fall as well, meaning that the government support needed to limit to an average of £3,000 may shrink. Hopefully the Cap might even fall below £3,000 – but that remains to be seen.
Additional government support
Government funded discounts (the ‘Energy Bills Support Scheme’) are being applied to everyone, in 6 monthly instalments, beginning in October, the last instalment being scheduled for March.
Additional support to vulnerable groups was also announced in the 2022 Autumn Statement. But in spite of these arrangements, net costs to households have still risen substantially, from where they were in September.
If you are in rented accommodation, paying rent inclusive of bills, your landlord should be passing on the savings. The government promised legislation to make sure that happens.
Domestic customers on a pre-payment meter should have long since received a £400 voucher by now, with which to top up their meters. It has been reported that almost half of these vouchers have yet to be presented (unless they were never sent to customers). If you have heard nothing, contact your supplier. This is urgent, as vouchers are time limited. Some suppliers are understood to be applying credit to pre-payment meters, on a ‘buy now, pay later’ basis, to avoid meters running out of credit and cutting off vulnerable customers. Check their policy with your supplier.
Suppliers are also being reminded of their duty to make sure that switching any defaulting customer to a pre-payment meter (which is more expensive) is a last resort after every effort has been made to help the customer find a way of paying. The practice of magistrates rubber stamping the invasive forced installation of pre-payment meters is supposed to be being halted.
In other cases, you should not need to apply for any of the government’s schemes. We have been assured the discounts will be applied automatically. Anyone approached by any person offering out of the blue to help you ‘claim’ any discount should be regarded with extreme caution – especially if they ask for bank or credit card details. This is almost certain to be a scam.
Energy Bill Relief Scheme (to 31/3/23)
The ‘Energy Bill Relief Scheme’ currently applies to non-domestic premises, including churches. Here is a summary:
- It applies to churches and others in the voluntary sector including charities, as well as the public sector such as schools and hospitals, and businesses;
- Support is for wholesale prices, ie the government compensates energy suppliers for passing on a price to the customer which is much lower than the previously predicted wholesale price;
- The supported price is 21.1p/kWh for electricity, 7.5p/kWh for gas;
- But that is not what customers including churches will actually be paying. Your supplier will still be adding standing charges, and their profit – so it won’t even be the same for everyone: there will be variation between suppliers and tariffs;
- The scheme applies to fixed price contracts agreed from 1 December 2021 onwards, and with a start date before 31 March 2023;
- It commenced in November 2022, backdated to 1 October, and continues for 6 months, therefore also to end of March 2023;
- Fixed price contracts dating from before 1 April 2022 are ineligible for the Energy Bill Relief Scheme;
- The scheme also applies to variable price contracts – but there is a limit on the discount; that also applies to ‘deemed rates’ – but the latter means occupiers who’ve moved into premises with existing suppliers, therefore should not be applying to churches;
- Customers who are out of contract should also be receiving a discount;
- As with the Energy Price Guarantee, eligible customers shouldn’t need to claim relief under the Energy Bill Relief Scheme: their supplier is supposed to apply the new arrangements automatically. Nonetheless, the government advises contacting your supplier to make sure you have the best deal under the scheme;
- Whether there is to be any subsidy for any church still buying oil is as yet unknown (domestic customers should be receiving a small discount for heating oil).
The Church of England, via the Diocese, is providing an additional support payment for parishes.
Energy Bills Discount Scheme (after 31/3/23)
As if there weren’t enough schemes and acronyms already, the government has announced a new arrangement for business, including churches and charities, to take effect after 31 March 2023, the ‘Energy Bills Discount Scheme’ (EBDS).
This is a discount to the market-driven price. It’s calculated in relation to wholesale prices, as the lesser of a stated unit discount, or the difference (if any) between the actual wholesale unit price and a defined floor price. Profit will still be added to the discounted price by the supplier. That may be applied differently by different suppliers. But it does seem as though the discount is guaranteed to be passed on to the customer, so should be declared as a discount on utility bills.
However it’s a tiny maximum discount – under 2p/unit (kWh) for elec, under 0.7p/kWh for gas. That does seem to mean that the net consumer price will still rise, unless wholesale prices plunge (as stated, there seems to be a falling trend as of early 2023).
It is currently very difficult for a domestic customer to switch to a different supplier.
It may still be possible for a non-domestic customer such as a church to switch to a new fixed price tariff, gaining the security of the Energy Bill Relief Scheme. That does seem to be possible if you have completed negotiations and are all set to sign. However it is unclear that the scheme will apply to new contracts which have not yet been negotiated. Even if such a contract is eligible, if you are already on a low fixed price, negotiated before December 2021, switching may involve paying more in the short term, hoping to save in the long term.
If you are currently out of contract and/or on a variable rate, it may be better not to make a change until the scheme ends, then to switch to a new fixed rate contract.
Caution is definitely needed. For example, bear in mind any contract terms which lock you in for the duration of the deal.
Also there may still be a risk of a supplier ceasing trading, as many did in Autumn 2021. Should the worst happen to your supplier, you should then be switched by Ofgem to a new supplier. After that, you have the option of choosing a suitable company to switch to.
Transferring takes a while, and if done prematurely that could cause a complex administrative tangle, possibly falling between two stools, as well as diverting the attention of suppliers from their urgent priorities. Besides, any company that one succeeded in transferring to might turn out not to be a safe haven.
We encourage churches to use a ‘green tariff’ for genuinely renewable electricity. Current advice on green tariffs can be found at Green Energy Suppliers. However, it is understood that (sadly) some renewable electricity suppliers are charging significantly higher rates. The general level of electricity prices is linked to the wholesale price of gas, but renewable generators are not using gas for generation (unlike most power stations). Hence the 45% temporary tax on generators announced by the Chancellor in his Autumn Statement.
Many have argued understandably that incentives should have been given to generators to increase investment in renewables. After all, the government has argued against increasing the windfall tax on fossil fuel companies, saying this would disincentivise investment, including investment in renewables. But fossil fuel majors are pocketing their huge profits, and at least one, BP, has actually decided to reduce its investment in renewables!
The ‘Energy Basket’ for CoE churches is now open for quotes from Parish Buying who run the service. Note that these prices do not qualify for the government’s relief schemes outlined above.
Companies at risk
A number of suppliers have ceased trading since autumn 2021, but we do not know whether any other particular supplier is still at risk of insolvency now, even with government support. Advice on what to do in this event is available from Ofgem at:
The first of these pages applies to any business – which may normally include your church. The second offers advice to consumers, households (and also businesses – the way the page is laid out, if you’re a consumer or household, keep scrolling down and continue reading below the panel about businesses).
The case of Bulb Energy is different from other suppliers who have become insolvent. For all the others (so far at the time of writing), Ofgem has made arrangements to transfer customers to other suppliers, such as British Gas. This is done automatically. Once that transfer has happened, customers can switch again to another company or tariff if they wish.
But Bulb had far too many customers to be transferred lock stock and barrel to anyone else. Therefore Bulb was placed under ‘special administration’, meaning the running of accounts continued unaffected while the administrators, Ofgem and the government decide what to do with them, which took some time to resolve.
Octopus have now negotiated to buy Bulb; the purchase was completed late December 2022. Customers have been assured that they need take no action, credit balances will be transferred with their account, which at least for the time being are to remain on the same terms. Domestic customers are now being transfered to Octopus’s systems. It is expected that non-domestic customers including churches will follow.
Whilst both Octopus and Bulb are adjudged to be ‘genuinely renewable’ for purposes of this year’s ‘Energy Footprint Tool’ (2023, ie in respect of energy use in 2022), that is to be reviewed in a year’s time (early 2024).
What should happen next
It is not advisable to cancel any direct debit, so long as your supplier (whoever that may be) is still in business and supplying you. If you cannot keep up payments, it is advisable to reach out to your supplier and attempt to negotiate an affordable payment plan.
It has been reported that some customers with smart meters who are seriously in arrears are being switched without notice to pre-payment meters, which have a higher tariff rate. This underlines the importance of keeping in touch with your supplier if you are in arrears.
It may also be prudent to consider other proactive steps (see below) to take while your supplier is still trading, whether or not you are in good standing, or you think they are at risk.
Whereas for a domestic property credit balances are protected, unfortunately that is not so for a church, which is treated as a business property. In that case only the supply is protected (so long as you keep paying, or have an agreed payment plan, or are negotiating a plan).
But sadly a business or church’s money isn’t protected. Many who are paying regular direct debits may be in credit before winter set in, having used less energy over the summer, and in readiness for increased heating bills over the winter. If you have a large surplus, you may be able to change the amount of payments, but it isn’t advisable to cancel while your supplier is still trading.
National Grid has warned of possible interruptions of supply during winter 2022/’23. However that is thought only to be likely if a number of adverse factors occur at the same time. That’s to some extent reassuring, but of course we all want to save energy, for obvious reasons and because that will make interruptions even less likely.
National Grid is offering deals to customers with smart meters where a lower tariff may be charged for electricity outside of periods of high demand.
Whatever supplier and tariff you are with, the following actions by churches and others are suggested:
- Visit your account(s) with your supplier(s) online, record the balance(s) and even take screenshot(s).
- Take meter readings frequently, both gas and electricity. Even photograph the meters as soon as you can during October, to make sure your supplier is using a more or less accurate figure for when prices increased. Do this even if you have smart meters.
- Report numbers to your supplier(s). There is likely to be an online facility to report customer readings. Take screenshots of online confirmations, and also of your account balances.
It is important to keep an eye in this way on your electricity as well as your gas, whether or not (in the case of a domestic user) you have a single dual fuel account with a single supplier. Sadly, electricity is affected as well as gas, because gas is used to generate most electricity. ‘Capped’ or ‘guaranteed’ prices for electricity have also gone up, albeit not by so great a jump as for gas.
Solar panels and smart metering
What happens about your solar panels or smart metering, if your supplier goes bust, or if you decide to transfer? If you have solar panels, you should be in receipt of the Feed-in Tariff (FiT) or the Smart Export Guarantee (SEG). Will these be transferred, when an existing supplier has ceased trading, or when switching to a new contract? Does the FiT or SEG transfer together with their account?
Feed-in Tariff (FiT)
The answer to the questions above appears to be that this probably won’t be transfered automatically to a new supplier. The new supplier may contact the customer about it, but it would be unwise to wait for that to happen.
Bulb customers should verify their position with Octopus. Customers of other suppliers should act fast to re-secure their incoming credits if/when their account is transfered, with their new supplier, if they are licensed for the FiT. If the transfer was made by Ofgem, it may be necessary to switch again at once, to a third supplier who is licensed.
The customer would be well advised to make sure they have details of their original registration to hand beforehand, and if not to speak to their present supplier, before they potentially get into trouble. Otherwise the particulars of their FiT registration may become inaccessible.
Smart Export Guarantee (SEG)
The FiT was superseded by the SEG a few years ago, for new entrants after that. Much the same points therefore apply. The customer should ask their new supplier whether they are SEG licensed, and if so to set up payments promptly. Otherwise they will need to switch again, to an SEG licensee.
In the above case, the customer should have a smart meter. They (and anyone else with a smart meter) should ascertain whether it is under the ‘SMETS2’ standard, or if not whether it has been upgraded to talk to the national communications network. Their existing supplier should know. If it isn’t SMETS2 or upgraded, then it will go ‘dumb’ when the account is transferred, and the customer will be back to taking manual readings.
As remarked above, if any smart meter user is in arrears or likely to go into arrears, they should reach out to their supplier, in case they are switched to pre-payment mode, without notice!
Lists of FiT licensed suppliers are at Feed-in Tariff licensees.
Information on the Smart Export Guarantee is at Smart Export Guarantee. Licensees are at SEG Licensees.
More information and advice
See download for ‘Tips for parishes to save energy and money’.
Church of England advice on Energy Efficiency Measures,
Heating your Church this Winter.
Contact your Area Financial Advisor,
Head of Environment and Sustainability
Caring for God’s Creation – Environment and Sustainability.