Business

Energy bills: ‘I am already paying an extra £60 a month’

When you have to find an extra £60 a month to pay your energy bill, something has to give.

For John Alderson, deciding on the occasional meal out or a trip to the cinema has become a more significant financial decision.

The 64-year-old, who works in North Shields for a cleaning company, is one of millions of people for whom the cost of domestic energy is going to take a big chunk out of the family budget.

Most people are going to see their bill rise sharply in April, when a new – much higher – energy price cap takes effect.

Mr Alderson is already feeling the impact. He had shopped around for the cheapest supplier, but his fixed-price deal came to an end in November.

When such a deal expires, customers automatically move onto a default tariff, which is protected by regulator Ofgem’s price cap – but which will rise by hundreds of pounds in April when suppliers are allowed to recoup some of the higher wholesale costs they face.

Experts suggest the vast majority of people are better off doing nothing and reverting to the default tariff.

However, some people like Mr Alderson, have decided that certainty on bills for the next 18 months meant it was worthwhile signing up to a new fixed deal.

The trouble is, it is expensive. He says the cost is “all-consuming”.

“It makes me feel angry. It is a very difficult thing to experience. At the moment we’re financially OK, but I worry about other people on the breadline or paying with a meter. We will pay our bills, we always do. But not everyone is so lucky,” he says.

“Then I get annoyed because there’s very little we can do about this, we can gripe and groan, but what can we do?”

Mr Alderson says options to keep the heating off are limited because his daughter is having to work from home owing to the pandemic. This, he says, is another scenario facing lots of people through no fault of their own.

Also feeling aggrieved is Tony Hughes, from Kent, who is already paying more for his energy – but for a different reason.

He was a customer of Avro, one of nearly 30 suppliers that have ceased trading as a result of the gas price crisis.

When a supplier folds, its customers are automatically transferred to another supplier. Their energy supply is protected, but their tariff – so how much they pay – is not.

Mr Hughes was moved, ended up paying considerably more on the new variable tariff, and is braced for that to rise again in April.

It means that, by the spring, he expects his annual energy bill to have risen by £1,400.

“Lots of people do not realise they will face this too,” he says. “We are having to subsidise this through our savings.”

He says that having saved throughout his working life for a nice retirement, he now is using that money for the heating.

“This is through no fault of my own. It is difficult to find that amount of money these days. I’ve accepted it’s beyond my control, but I’m worried about the further increase which could happen soon,” he says.

“I just hope it’s short lived. I can live with it for a year and hopefully prices will drop.

“The government has got to do something. They’ve got to help the companies in the short term or help the customer. Some people might not have savings. It shouldn’t be about eating or heating. We expect things to vary a bit, but that’s a huge increase. I can’t understand how people who are already struggling are going to afford it.”

Government talks
Trade body Energy UK has predicted bills will surge by up to 50% in April, when the change to the price cap, due to be determined in February, kicks in. It said the average household could end up paying about £700 more per year.

The prime minister has said he met Chancellor Rishi Sunak to discuss the cost of living issues being faced by households. Boris Johnson said he had been meeting the chancellor “constantly”.

“I understand the pressures people are facing on their household finances” he said, “It’s making life very tough. We’ve got to help people, particularly people on low incomes, we’ve got to help people with the cost of their fuel.”

Labour and the Liberal Democrats have called for a windfall tax on North Sea oil and gas producers to fund measures to ease the cost for consumers.