October 2022 digital edition

Electricity co-ops weigh the
costs of the
energy crisis
THE
GOVERNMENT
PRICE CAP HAS
INCREASED BY
ALMOST £58
PER MONTH FOR
A TYPICAL HOME
By Miles Hadfield
The energy crisis is forcing price hikes around
the world; in the UK, millions are in fear of fuel
poverty as winter looms, and many businesses
are concerned about unaffordable fuel costs,
prompting new prime minister Liz Truss to
announce a price cap, leaving the typical
domestic bill at £2,500.
The country’s biggest energy co-op, Your Co-op
Energy, a joint venture between Octopus Energy
and the Midcounties Co-op, has posted a Q&A
for members on its website, noting that “the
government price cap has increased by almost
£58 per month for a typical home, which means
that families all across the country are wondering
how they can take control and do something to
manage their energy bills”.
It says it “takes great pride in our relationship
with our customers and we understand that
this is a strenuous time for everyone”, but adds,
“tariffs have gone up this much because it costs
us five times more to buy energy now compared
to last year. Our new variable price is protected
by the price cap.”
Co-op Energy says there has been an average
increase of 54% in the cost of energy price
cap was last set six months ago. “If you’re
coming off a fixed price, your increase may be
more,” it warns.
One question it addresses relates to the cost
of renewable energy: the crisis was sparked by
soaring gas prices resulting from the Ukraine
war, but 100% renewable tariffs are also rising.
Co-op Energy tells customers: “It’s down to the
way the market works. The grid sets a single half
hourly price for all types of energy in the system.
That price often ends up based on the most
expensive source in the mix which is generally
gas, which is why even on green tariffs right now,
gas is setting the price.”
It adds that the price change only affects
customers on flexible tariffs, not its fixed tariffs,
and is contacting those affected to discuss their
options. “We’re committed to making renewable
energy affordable for everyone, so we’d prefer
to never raise prices,” it adds. “Our relationship
with Octopus Energy has meant that we have
been able to offer alternatives during this hard
financial time.”
Meanwhile, Community Energy England (CEE),
which represents member-owned renewables
across the country, welcomed the energy cap –
and suggests its members take advantage of the
government advice that “companies with the
wherewithall should be looking at ways they can
improve energy efficiency and increase direct
energy generation” by contacting local firms.
But, it warns, the energy cap “does not solve
the problem and comes packaged with a lot of
downsides”, with millions already struggling
with the cost of living. Even with the price cap,
“potentially more than 7 million households will
be struggling to pay energy bills – and will be
going cold and/or hungry this winter”, it adds.
The government’s support package could cost
upward of £100bn, to be funded by borrowing
and ultimately borne by the taxpayer. “This
money will effectively add to the excess profits of
the oil and gas giants who should be contributing
to paying for it,” says CEE, criticising the
decision not to levy a windfall tax on gas and oil
industry profits.
It is also concerned about government
ambitions to increase gas sourcing from the
North Sea, and to lift the ban on fracking – which
would not cut the price of gas, or energy bills.
“They will also temporarily suspend all ‘green
levies’ on electricity bills which pay for many
measures in the energy transition,” CEE adds.
“They made no statement about how these
things will continue to be paid for or where some
of them will simply stop.”
It notes the government promise of an Energy
Supply Task Force “to focus action on securing
domestic energy supply to reduce energy price
shocks from international factors”, a fresh look
30 | OCTOBER 2022