Why can't I see my Government levy £170 reduction

Hi ​@costeek ,

OVO is currently working on setting this up - it’ll be applied to your tariff rates from the 1st April 2026 so you won’t see a direct credit, but you will see it over time in reduced bills.

This is all part of the governments energy cap that reduces from 1st April 2026. The energy cap will be coming down by 6.7% giving a reduction for the average bill payer of £1,641.00 per year a saving of £117.00. Your actual saving will depend on how much electricity and Gas used, the tariff and payment method.

Overall this has to be good news for the consumer at a time when fuel (Petrol & Diesel) is on the increase due to the situation in the middle east,

I understand that it’s not a direct credit, though it was never clearly explained. But apparently, the promised £170/117 reduction, which was mentioned many many times, is actually £23.90 in my case. A bit misleading, I would say.

Also, is this estimated being counted if I would pay this price 12 months in a row? Obviously, it is going to rise after three months. So, in reality, it is even less than that?

My frustration is more in general, rather than addressed to OVO. 

I think in November it was mentioned as £170 by some politicians. But even it’s £150 in average or £117 (instead of £170 – they sound similar, I could easily misheard it). But it’s annual, meaning – yearly. The first link you shared states: “£150 is what the average customer is estimated to save each year with the levy reduction”. But how it is each year if prices change each three months? And very likely it will go up in July. This all sounds very confusing to me. I’m just trying to understand how the said £117 (let’s assume I misheard it) in reality are £23.90 in my case?

Politicians speak with forked tounges.

What the political headlines say is very rarely true for everyone.

I wouldn't say I didn't know that. But that’s what I learned. My savings are going to be roughly £2 monthly next three months.

The saving is 3.54 p/kWh (so £2 is what you’d save from 56 kWh by virtue of the Chancellor’s benevolence). The problem is that other costs have increased.

Whenever any price changes are announced, whether by the government or by Ofgem, the changes are quoted for the “average customer” and for what those changes would mean for that customer if no other changes were made for the next 12 months. However, we have, now, a different price structure every three months. This method of reporting/quoting has always been nonsense, but it is hard to know what would be better.

According to Ofgem, the average (medium) UK household, typically 2-3 people, consumes roughly 2,700 kWh of electricity and 11,500 kWh of gas per year. I live in what Ofgem would describe as an average (medium) household of 2 people. However, my usage is: 2835 kWh of electricity and 5494 kWh of gas. This means that any figures quoted by the government or Ofgem would be different for me because of my personal usage. 

​@costeek 

Basically the average use applies to nobody because nobody uses exactly the average. And the average cost or savings doesn't exist because all the Regions are priced differently from the average. You might as well ask what is the length of a piece of string which in your case turns out to be £23.90. If indeed it's right.

The old pedant can’t resist, sorry …

I think you’ll find that Ofgem always refer to the ‘typical’ household or consumer. Their reasoning:

Those ‘few’ consuming large amounts would skew the average (the mean) unhelpfully, so the median consumption (the amount that half of households use less than and the other half more than) is reckoned to be a more suitable measure.    

Hey ​@costeek 

I’m glad to see everyone’s already stopped by with some helpful advice for you already, Firedog linked to a helpful article on the webpage that details more on how the levy will be delivered for each customer sub-section.

We do also have a post on the Forum which you can check out below too, but ultimately as Firedog noted, it’ll be applied to unit rates rather than a lump sum payment onto the account. We’ll be contacting customers soon with their new estimated costs, and you’ll be able to see your new rates from 1 April. 

If you do have any more questions, do let us know.😊

I’m an Agile Octopus user and Greg Jackson has just sent me an email to say that for Agile customers … we will apply the full government discount to your dynamic Agile Octopus unit price …

Now, for those who don’t know, Agile is a dynamic tariff and each half hour settlement period is priced differently. It can go from 99.99p / unit (ouch) to -19p a unit (yes, I get paid to use power). I use about 7,000 kWh a year with my EV and HP etc and that would mean my discount, if applied to every HH price would reduce my bill by about £245.

For that to be true then even my negative priced HH slots would be reduced by about 3.5p i.e. -10.0p would become -13.5p. An awful lot of units are priced at zero (it’s the way the market works when there is too much of renewables on the grid) now become -3.5p for me.

I’m not saying this is true, I’ve asked on my other forum is that can possibly be true and we may find out after the 1st April if it is true. If it is I’ve definitely come out as a winner in this. (surely not)

Peter

This is just how it should be done IMO. I don’t know how the costs that have been diverted from energy bills are levied on suppliers, but Ofgem quote them as a price per unit delivered. There is probably a regular estimated payment coupled with a reconciliation, perhaps at year-end. The figures we’ve seen for the amount of the reduction are derived from Ofgem’s current estimates of the size of the levies:

ECO (Energy Company Obligation): £8.91/MWh of electricity supplied, £3.15/MWh of gas
RO (Renewables Obligation): 75% of £33.06/MWh of electricity  

For the electricity supply, then, the cost reduction is 8.91 +  24.80 = £33.71/MWh or 3.37 p/kWh. Add 5% VAT to get the 3.54 p/kWh. For gas, it’s just 0.315 + 5% = 0.33 p/kWh.

The rebate shouldn’t vary at all with the amount you’re paying per kWh - it should depend solely on how many kWh your supplier delivers. It will be interesting to see whether OVO do their sums like this. If you have 4,000,000 customers each using 2700 kWh a year, that’s 10.8 million MWh. Dropping your revenue from one month to the next by £33.71 x 10.8 x 10⁶ = £364 million/12 = £30 million a month while you’re probably still paying off what you took in last (fiscal) year might be painful. 

[E&OE as always!]