Families 'to be hit with surge pricing' under new energy bill tariffs

Families to pay even more under ‘surge pricing’ for using energy at peak times after Scottish Power, EDF and Octopus Energy supported radical new tariffs

  • Surge pricing tariffs could see families fork out extra for power at peak times 
  • Scottish Power, EDF and Octopus Energy all backed new revolutionary plans
  • They collectively supply power to more than 11 million households across Britain 

Families are facing the prospect of paying premium prices on their energy bills when using power at peak times under new plans backed by three of Britain’s biggest suppliers. 

Scottish Power, EDF and Octopus Energy have agreed to overhaul the energy market that could see consumers charged more under a ‘surge pricing’ tariff.

Smart meters would automatically update firms every 30 minutes to update them on each household’s individual energy usage.

With families already bracing themselves for Britain’s cost of living crisis, pockets could be hit further with higher premiums for boiling the kettle or watching television at peak times throughout the day.

Bosses as Octopus Energy have already said the plans would be ‘extremely good for consumers’. 

Families are facing the prospect of paying premium prices on their energy bills when using power at peak times under new plans backed by three of Britain’s biggest suppliers

Scottish Power, EDF and Octopus Energy have agreed to overhaul the energy market that could see consumers charged more under ‘surge pricing’ tariffs

Presently, most households are charged a flat rate for their electricity and gas usage under current tariffs.

Under a surge pricing model, households could be able to draw power from the grid at cheaper times – and potentially see refunds on surplus energy as prices rise during busy periods. 

Energy watchdog Ofgem has previously said that surge pricing could lead to savings for plucky customers who choose to use power outside of peak times.

By 2025, tariffs will be more common as the regulator plans to make smart meter’s half-hourly updates a default option for millions of customers.   

EDF, Scottish Power and Octopus Energy collectively serve more than 11 million UK households with electricity.

The annual bill for a typical household is due to go up from £1,277 to £1,971 from April 1, but some industry analysts are predicting it will go up again to £2,300 from October 1. The rise is being blamed on a spike in wholesale gas prices (pictured)

Ofgem’s chief executive, Jonathan Brearlery admitted that the regulator should have acted faster in testing the financial resilience of new suppliers coming into the market to make sure they would survive increases in wholesale prices. Pictured: Ofgem shows the breakdown of costs in the energy price cap for a dual fuel customer paying by direct debit with typical use

A Scottish Power spokesman said: ‘Time of use tariffs that are updated on a half-hourly basis will give consumers a real opportunity to save money on their energy bills, particularly for EV drivers charging from home.

‘Half-hourly updates will also give a highly accurate profile of local electricity demand as the country moves towards an all-electric future through net zero.

‘This will allow network companies to get more out of existing grid infrastructure and target upgrades to the grid for increased demand more efficiently.’

EDF said: ‘Half-hourly market settlement will play a key part in our transition towards a net zero future, as well as benefiting customers.

‘We already have a number of simple Time of Use tariffs available, which enable customers to enjoy lower prices at night-time, when energy is less in demand and therefore cheaper, including a tariff designed to help EV charging at a cheaper rate.’

Demand is growing for energy firms to face a windfall tax after oil giant BP posted its highest annual profit in eight years and announced more returns for shareholders while Shell boasted of ‘momentous’ £12billion profits – and ordinary Britons endure soaring energy bills amid rampant inflation and a cost-of-living crisis.

BP revealed it swung to a mammoth £9.5 billion underlying replacement cost profit – its preferred measure – for 2021 from losses of £4.2 billion the previous year, notching up £3.01 billion of profits in the final three months alone – up from just £85.1 million a year earlier.

The company also announced more cash returns for shareholders, with another £1.1 billion of share buybacks before its first-quarter 2022 results and a dividend payout of 3.37p a share for the fourth quarter.

And London-based energy giant Shell has increased its profits nearly fourteen-fold to £12billion, it was revealed last week. The company collected £6.55 ($8.88) for every thousand cubic feet of gas it sold to customers in the last quarter of 2021 – with gas previously selling for less than half this amount only six months earlier.

BP had recovered from a torrid 2020, when the pandemic sent it slumping £13.4 billion into the red on a statutory basis – its biggest ever annual loss.

But oil and gas prices have since rebounded as economies worldwide reopened following the early stages of the pandemic – and the results are now intensifying pressure on energy firms as they reap mammoth profit hauls while households and businesses struggle to pay energy bills amid soaring inflation.

A sharp rise in wholesale gas prices has led to energy regulator Ofgem raising the cap that limits what suppliers can charge consumers in England, Scotland and Wales by £693 to £1,971 a year from April – with a further hike expected in October.

Britons also face other demands on their income, including rising food, broadband and mobile phone costs as inflation rises to a 30-year high, with the Bank of England forecasting it will hit 7.25 per cent in April.

Calls are now growing for a windfall tax on energy giants, with Labour MPs arguing that while households are paying through their teeth for gas – energy bills are set to spike more than 50% in April – the companies which extract that gas are reporting massive profits.

Shadow secretary of state for climate change and net zero Ed Miliband tweeted: ‘BP’s results demonstrate again that it is fair and right to levy a windfall tax on oil and gas producers to help the millions of families facing the cost of living crisis. The Conservatives are completely out of step with the mood of the country in rejecting it.’

Liberal Democrat leader Sir Ed Davey described the energy crisis as a ‘redistribution of wealth from millions of people struggling to pay their heating bills to shareholders of large oil and gas firms’ which must be tackled through the introduction of a windfall tax on fossil fuel producers.

Demand for electricity is set to surge in coming decades as people ditch their petrol and diesel cars for electric models and swap gas boilers for electric heat pumps or hydrogen made from renewable energy, under the Government’s net zero drive.

This will happen as coal and gas-fired power stations make way for more and more wind and solar power.

It comes after Britons were warned last week that they face the biggest fall in living standards on record with energy bills and mortgage rates soaring on what has been dubbed ‘Black Thursday’. 

A new surge in energy bills could also be expected, up to a further £700-per-year, if gas supplies are hit should Russia invade Ukraine.  

The regulator, Ofgem, told MPs yesterday that current forecasts suggest another increase is likely to come into effect before next winter.

The annual bill for a typical household is due to go up from £1,277 to £1,971 from April 1, but some industry analysts are predicting it will go up again to £2,300 from October 1. 

It comes as Rishi Sunak finally unveiled a £9billion cost-of-living crisis package, but admitted it will hardly make a dent in the pain for families.

The Chancellor announced new help in the Commons minutes after it was revealed the energy price cap is going up 54 per cent for millions of people in April, meaning typical costs will rise £693 to £1,971.

And as he spoke, the Bank of England pushed interest rates to 0.5 per cent to control rampant inflation, which it now believes will reach 7.25 per cent in April and act like a lead weight on the economy, as well as pushing up unemployment.

It cautioned that disposable incomes are on track to fall by around 2 per cent — the worst impact since comparable records began in 1990.

Mr Sunak said A-D band homes in England will get £150 council tax rebates, while £200 government-backed discounts will help temporarily keep electricity bills lower for everyone — but must be repaid over five years.

There will also be a £150million ‘discretionary fund’ for local authorities to distribute to worse-off families.

But Mr Sunak conceded it would be ‘wrong and dishonest’ to claim that he can take away all the pain, pointing to soaring global gas costs.

He said the ‘vast majority’ of households would see a £350 benefit — but that is barely half the average energy cap increase.

‘Without Government action, this could be incredibly tough for millions of hardworking families. So the Government is going to step in to directly help people manage those extra costs,’ Mr Sunak said.

The policy had been delayed by weeks of internal wrangling with Boris Johnson and the Cabinet, after many ministers pushed for the £12billion national insurance raid to be delayed or axed.

Labour accused Mr Sunak of a ‘puny’ response and a ‘buy now pay later’ approach, arguing he is merely delaying the pain.

He was also assailed by some Tory MPs, with Peter Bone branding him a ‘socialist’ in an extraordinary barb.

Mr Sunak said: ‘We are delivering that support in three different ways. First we will spread the worst of the extra costs of this year’s energy price shock over time.

‘This year all domestic electricity customers will receive an up front discount on their bills worth £200.

‘Energy suppliers will apply the discount on people’s bills from October with the Government meeting the cost in full, that discount will automatically be repaid from people’s bills in equal £40 instalments over the next five years.’

Alarmingly many members of the Monetary Policy Committee pushed for a bigger rates increase to 0.75 per cent. Investors are anticipating the level will reach 1.5 per cent by the end of the year.

Governor Andrew Bailey said it had been a ‘close call’ but stressed there was only likely to be ‘modest’ further increases in the coming months.

He said the Bank had not acted because the economy is ‘roaring away’, but to counter the risk that inflation is becoming ‘ingrained’ domestically. The new peak is two percentage points higher than was forecast in November.

Experts are warning the cost-of-living crisis could last years, with ministers hitting the panic button amid fears it will be even more toxic to the Government than Partygate.

Meanwhile, Labour has renewed its demand for a windfall tax on energy companies after Shell recorded an eye-watering £12billion profit in just three months.

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