By John Kemp

We all must be worried about the recent escalation in energy costs now joined by inflation. I am not an economist but here are my views about how we should respond to the current crises  we are experiencing.

My first suggestion is “Don’t panic Mr Mainwaring!” The problems we are experiencing are well above our pay grades. We must just do what we can to mitigate their effects on our lives.

What’s been happening to energy costs?

After a fairly stable decade, energy prices started to rise in 2019. That was when Ofgem (the Office of Gas & Electricity Markets tasked with “protecting consumers by delivering a greener, fairer energy system”) first introduced its price cap.

This was intended to protect consumers by setting a maximum amount energy providers could charge their customers on variable rate contracts. Consumers could, however, sign up to fixed rate deals which guaranteed a fixed price for a fixed term.

But wholesale prices have been increasing considerably since then and last year we were warned about significant price rises to come caused by increased wholesale prices partly due to Russia putting up prices but also the increased production costs. The war in Ukraine has made matters much worse this year and, as I write, President Putin has cut off all his supplies that a number of mainland European countries rely on.

At the end of 2021, the average consumer’s cost for both gas and electricity was around £1055 but the current price cap is £1971 and was planned to increase to £3549 on the 1st October with even further increases forecast for 2023.

How has government helping to keep costs down?

But the government has stepped in to help us and is financing the cost of a lower cap of £2500. Called the Energy Price Guarantee this will keep the cap to this level for two years regardless of wholesale energy costs.

The cap is calculated on a consumer’s average usage at a rate of 34p per KWh of electricity used and 10.3p for every KWh of gas consumed.

The £2500 figure is an estimate of average costs based on the above rates, but individual consumers could pay more or less depending on the size of their homes, their insulation levels and their actual consumption.

In addition, the government’s Energy Bills Support Scheme will contribute £400 to every consumer over the next six months. This will be paid direct into bank accounts by energy providers in six monthly contributions starting in October. If you have not received your first payment before the end of October, contact your energy provider.

In addition the following payments will be made:

  • A £650 Cost of Living payment (split into two payments) will be paid to households on means tested benefits
  • A £300 Pension Cost of Living Payment alongside the Winter Fuel Payment to pensioners ( a total of £500 per household usually paid in November)
  • A £150 Disability Cost of Living Payment to people on certain disability benefits

Whilst these payments will help, they are unlikely to cover the cost of increases to the £2500 cap and everyone’s bills are likely to be more.

And as explained above, the price cap is based on average costs and individual bills may be considerably more.

What can we do to keep costs down?

We need to take a greater interest in the energy we use and consider what actions we can take to reduce consumption.

I must admit that I have had a smart meter for a couple of years but have only just started interrogating it in the last few days. And I have learnt some interesting facts.

My home, a standard three-bedroomed property, costs around 5p an hour in electricity when nothing is running apart from the standard things like fridge, freezer, radio, a few lights and many electronic devices. But switch on the kettle and it’s an additional 60p an hour. OK, it only takes three minutes to boil so it’s only 3p a cup of tea, but I can save money by not filling the kettle so much.

The oven works out at around 75p an hour. I’ve addressed this by buying an Air Fryer which costs half as much to run by only heating a small area and doing it fast. My initial thought was another gadget that doesn’t achieve much but it really works and well worth the investment. Mine cost almost £100 but they start from around £40.

My Smart Meter at a quiet time
Cosori Air Fryer

The washing machine and dishwashers come in at about 50p an hour each because they have to heat the water as well as do the washing. Just make sure you only use full loads and don’t use more often than you need.

I haven’t had a bath in years, preferring showers. But I’ve found out that the electric shower is costing me £1.90 an hour so l am limiting my time to three or four minutes and am still shiny clean.

The only gas we use is for central heating and hot water (and not much of that as we tend to have electric showers). The cost has been non-existent over the summer but now that it’s getting cooler, I am expecting my gas usage to increase. Here we will just turn the dial down a little and wear jumpers in the evening. We are also lucky to have a fireplace and a large supply of logs.

How can those experiencing problems paying their bills get help?

I am fairly lucky. Although retired I have a private pension as well as the state pension. This ensures bills gets paid but like most people I am worried about how much costs are going up without a similar increase in income.

But I know there are many people on low incomes who are extremely concerned about how they are going to survive the coming months. If even with the government benefits outlined above you are still having difficulties paying your energy bills, the first step is to contact your energy provider for assistance. Don’t ignore the problem.

No energy supplier wants to disconnect a vulnerable customer, especially in the cold winter months. The UK’s “Big 6” energy suppliers ( British Gas, Scottish Power, E.On, EDF. N Power and SSE) have all signed an agreement that they will not disconnect their vulnerable customers at any time of the year.

Your supplier has to work with you to agree a payment plan that suits you.

These include things like:

  • reviewing your bill and agreeing more affordable payments
  • giving you a payment break
  • reducing how much you pay to give you a chance to catch up
  • giving you longer to repay what you owe
  • access to charitable grants or hardship funds
  • maybe install a pay as you go meter

If you still have problems contact Banstead Citizens Advice Bureau which is located at the Banstead Centre, The Horseshoe, Banstead, SM7 2BQ. Telephone: 0808 278 7945. It’s opening hours are 10 am to 4 pm Monday to Friday but it is advisable to telephone first.

Another option is to contact one of the Debt Charities that provide free help to people in debt. I suggest StepChange

Surrey Community Action also has a great web site “Warmth Matters” that provides lots of useful information.

Local and central government are also preparing advice and providing warm spaces where you can go if it’s too cold at home. If you can’t afford to heat your home, there will be somewhere you can go to keep warm. Details are still being finalised, but it is possible that the Merland Rise Church will be open for three days a week for those needing somewhere warm to go.

And what about inflation?

The average price of a pint of milk is 62p, up from 43p a year ago, an increase of over 40%. But this is just one example of how food costs have, and still are increasing.

The rate of inflation is calculated in the UK by calculating the cost of a weighted basket of goods and services that the average person consumes. This is called the Consumer Price Index (CPI)  and in August 2022 the index was up 9.9% on the year and forecast to exceed 10%. The target figure is 2%.

The increase is due to a variety of reasons, but the major influences are food and fossil fuel costs. The pandemic can be accounted  for some of the rising costs when certain goods were in short supply and the war in Ukraine has not helped.

The recent mini budget has also put added pressure on inflation. The drop in the sterling exchange rate has automatically increased the cost of everything we import. And currently this is 46% of the food we consume! Added to this, the increase in interest rates is going to have a devastating impact on mortgage rates in the coming months.

What can we do about inflation?

Not very much. The wise approach is to review your expenditure and see what costs can be reduced. Here are a few ideas:

  • Cancel any subscriptions you hardly use or services you can do without
  • Shop with a shopping list and keep to it
  • Look at replacing expensive brands with cheaper own label products – for example, a large jar of Heinz Tomato Ketchup costs £3.49 (38p per 100g) compared to Tesco’s own label brand at £1 (11p per 100g)
  • Shop in low-cost supermarkets – Waitrose is nice, but Lidl is a lot cheaper
  • Check out and use supermarket money back deals – Asda and Lidl have apps offering money back and Iceland gives over 60s a 10% discount on Tuesdays
  • Look at transferring credit card balances to cards offering a zero-rate interest period
  • If you use a credit card, look for one that offers a cash back deal
  • It’s time to give up those coffees on the go
  • Avoid food waste – cut down portion sizes and don’t overbuy  fresh food that can go to waste
  • Always check your insurance renewals to ensure you have the best value
  • Watch your energy expenditure as outlined earlier

I hope this article will help readers to understand the issues we are all experiencing with energy costs and inflation and provide a few ideas on how to minimise their impact.

This article is the author’s views and his alone. It provides some ideas on addressing increased energy costs and inflation but should not be considered to be offering financial advice. It is also based on information available on 30th September which may change.

The views and ideas expressed are those of the author alone and do not represent the views of Tattenham & Preston Residents Association.