The energy regulator is planning to reform the UK’s energy infrastructure as bills could be set to rise by £219million.
The average bill will rise by £150 this summer for millions of customers across the UK. Around 125 fixed-term energy contracts are set to end, the price increases will have a noticeable effect on nearly 1.5 million households, if they do not switch to a new fixed-term energy tariff.
In the above example, if these households do not make the transition to a new fixed-term deal, the collective price increase would be a staggering £219million. Fixed-term tariffs are normally much cheaper than a standard variable-rate tariff (SVT), typically an energy supplier’s most expensive price plan.
As a result, customers are recommended to check the expiry date of their existing deal and conduct an energy comparison before being moved over to a standard variable tariff.
Even though gas and electricity bills are set to increase for more than one million UK households, Ofgem has announced plans to improve the country’s energy infrastructure. These plans would save customers around £20 each year, although they haven’t come without some level of criticism from providers.
The five-year programme will be introduced in 2021 and includes a £25billion investment which will “transform Britain’s energy networks to deliver emissions-free green energy”.
Existing gas and electricity networks, including those managed by National Grid, will be upgraded under the proposals. Furthermore, an additional £10billion has been set aside to support energy networks in increasing their capacity for renewable energy generation. On top of this, a new Strategic Innovation Fund will provide £630million to help accelerate research and development in clean energy projects.
As expected, the majority of the investment has been designed to facilitate a green recovery and ensure customers pay less for their gas and electricity bills. Ofgem announced the plans by saying it would be “pushing companies to be much more efficient in how they run themselves,” and also asking that dividends paid to shareholders be cut significantly.
The energy regulator believes these proposals would cut company earnings by 50%, and potentially save energy customers around £3.3billion. Under current rules, around 25% of the average customer’s energy bill goes towards paying for the network.
Network companies will have the opportunity to provide feedback, and a final decision for these proposals is expected to be made in December. The full proposals can be viewed on the Ofgem website by clicking here.