Energy bill savings due to scrapping of ECO and 75% reduction in RO cost

Hi ​@Peter E 

Many thanks for your response.

I guess you could argue that the fixed price tartiff is not impacted by energy cost fluctations which will of course always occur. But where government interventions like this happen and they confirm there is an expectation that it should apply to all energy consumers including those on fixed rates. it has to apply equally to all consumers. Given the existing government’s liking for hiking and introducing new taxes, if they introduced a brand new tax for example which resulted in energy companies having to pass it onto their customers and a government expectation for them to do so, I would expect it to apply to all custiomers including those on a fixed rate. 

If this one is not applied across the board, then those on fixed rates end up paying the tax both on their energy bills and through general taxation.

I await Ovo official confirmation of how they intend to implement this over the next few weeks.

Thanks again

Ren 

I can’t remember what I wrote. It’s not just changes in the price cap, though. Suppliers are liable for all sorts of costs, and these vary because of all sorts of changes made by those levying them - the Treasury, Ofgem, power generators, transmission and distribution network operators and possibly others. The changes referred to here are the ones presaged in November’s budget, which reduce suppliers’ ‘policy’ costs by an amount that averages ~£154 per household. This will be taken into account in the 2nd quarter cap, to be revealed next week - nice for those on standard variable tariffs. 

Somebody then cried foul, and demanded that all customers - not just those on capped tariffs - should benefit from the treasury’s generosity, including therefore all those on fixed-rate tariffs. I will have drawn attention to the fact that if government-mandated reductions in their demands on suppliers can be applied to those who thought their tariff rates were fixed, there is nothing to stop the opposite from happening. Increases in mandatory costs could with impunity also be imposed on those who thought their tariff rates were fixed - couldn’t they? If that other ‘policy cost’ - VAT - rises or falls, the cost of all energy tariffs does too, so there is a precedent.

Ah yes, the old favourite notional “average household” consumption figure again! Of course the more kWh a household buys, then the more one will “save”, at a (probable) approximate rate of  3.5p per electricity kWh and 0.35p per gas kWh.  Over a year of normal usage in my particular household, for example, this might seem to offer an “apparent” saving of £12 + £1.50 + around 0.70p in VAT savings. 

“Apparent” because, as has been said, not only has general taxation got to recover such savings, but in addition the increased price cap to come will, as Martin Lewis says, affect “the pound in one’s pocket” (I’m old enough actually to remember Harry using that picturesque expression!) associated with the apparent savings…even for those of us on fixed tariffs such tariffs ultimately offer only a short horizon, even without any possibly prescient precedents (can I say “prescient precedents”?!) alluded to by ​@Firedog 

Alliterations always allowable

Alan (my other, seldom used name)

[Good to see you active here again, Walt - we missed you for some time, I think ...]

There are two different sorts of ‘ordinary’ households involved here, which doesn’t help deconstruct a situation that was unnecessarily complicated to start with.

• One is the Ofgem ‘typical’ household, which isn’t average at all. It’s in fact the notional household whose consumption is exceeded by 50% of households. This (the median value) is in their view a better measure of the ‘ordinary’ household, because the average is distorted by a small number of very high consumption figures at the top of the pile.  
• The other is the Treasury’s back-of-a-fag-packet estimate of what reduction in bills the energy consumer can expect from the changes in ‘policy’ costs. They took an estimate of the total annual costs which suppliers will now not have to cough up from April 2026 and divided it by the ONS’ best guess at the number of households in GB. The result - ~£154 - was rounded down to £150 before publication so as not to raise expectations too high.

If you apply the widely-expected reduction in unit rates to Ofgem’s typical household, you’ll find that their energy bill will notionally be only £134 lower. 

Ofgem will be announcing the 2nd quarter price cap in a couple of days’ time. It will be fascinating to see how they’ve juggled this along with the transfer of the Warm Home Discount levy from standing charge to unit rate, and most interesting for me how the fixed rates of existing fixed-rate plans will loosen to satisfy the demands of sundry cabinet ministers and consumer champions.