MSE News: Energy bills to rise 2% in October as new Price Cap is announced

cdunne

Just an idea I had the other night.. the government is keen for people to switch from gas to electricity and yet the electricity price (although based on gas) is inflated due to all the green levies, network updates etc that it needs to fund. I read a report that stated that heat pumps typically use 1/4 of the energy compared to their gas counterparts but the financial savings were minimal because of the higher electricity price. Therefore I wondered if the green levies should be switched from the electricity to gas fuel costs to make heat pumps financially viable. (I can see there would be a backlash so they'd have to gradually introduce the switch?)

QrizB

cdunne said:

Therefore I wondered if the green levies should be switched from the electricity to gas fuel costs to make heat pumps financially viable. (I can see there would be a backlash so they'd have to gradually introduce the switch?)

It's an idea that comes up quite regularly on this forum.

When the green levies were introduced, the average carbon intensity (number of grams of CO2 per kWh of useful energy) of electricity was getting on for twice that of gas.

Today, that's reversed and gas is twice the intensity of electricity. Gas hasn't got dirtier but electricity has got cleaner.

You could definitely argue that there needs to be a rebalancing of these costs.

mmmmikey

cdunne said:

Just an idea I had the other night.. the government is keen for people to switch from gas to electricity and yet the electricity price (although based on gas) is inflated due to all the green levies, network updates etc that it needs to fund. I read a report that stated that heat pumps typically use 1/4 of the energy compared to their gas counterparts but the financial savings were minimal because of the higher electricity price. Therefore I wondered if the green levies should be switched from the electricity to gas fuel costs to make heat pumps financially viable. (I can see there would be a backlash so they'd have to gradually introduce the switch?)

An interesting thought - I certainly agree with the idea of some sort of re-balancing. IIRC the rationale behind loading the levies onto electricity is that pretty much uses electricity but not everyone uses gas. So putting the levies onto electricity was perceived as being fairer. I'm not sure I'm totally convinced by this particular fairness argument but do think it has some merit that should be factored in.

Alnat1

The problem is that everyone has electricity but not everyone has gas.

If the costs were transferred to gas accounts the government would need to increase the amount each user pays in order to generate the same income.

Can't see that going down too well with those who would need to pay more.

Maybe they could get away with a gradual switch over several years?

debitcardmayhem

cdunne said:

Just an idea I had the other night.. the government is keen for people to switch from gas to electricity and yet the electricity price (although based on gas) is inflated due to all the green levies, network updates etc that it needs to fund. I read a report that stated that heat pumps typically use 1/4 of the energy compared to their gas counterparts but the financial savings were minimal because of the higher electricity price. Therefore I wondered if the green levies should be switched from the electricity to gas fuel costs to make heat pumps financially viable. (I can see there would be a backlash so they'd have to gradually introduce the switch?)

Also put levies on heating oil, wood , carbon based fuels in general . I would suggest that they the government would leave electricity as is and put levies on the rest too.

@mmmmikey but not popcorn 😛

Scot_39

MSE_Helen_K said:

The price most households pay for gas and electricity will rise by 2% on average from 1 October 2025 as energy regulator Ofgem has announced the latest Energy Price Cap rates. But you can act now to save 15% – here's how.

Read the full story:

'Energy bills to rise 2% in October as new Price Cap is announced – act now to save 15%'

If you haven’t already, join the forum to reply.

Can you please modify that duel fuel centric headline as the all electric profile class 2 cap is actually going up 3%.

Those already paying the highest unit rates for their energy - and specifically their winter heating given timing of rise - being penalised even more in percentage terms.

QrizB

Alnat1 said:

The problem is that everyone has electricity but not everyone has gas. 

One option that could be defended as "fair" would be to put the levy in the unit cost, as a carbon tax.

Keeping to round numbers, electricity is about 100g of CO2 per kWh while gas is 200g. For off-grid folk, LPG is about 230g and kerosene (heating oil) is about 270g.

Carbon credits are traded at about £50 per tonne, 5p per kg. If we used that price, we'd be adding 0.5p to a kWh of electricity, 1p to gas, 1.15p to LPG (8p per litre) and 1.35p to kero (13.5p per litre).

debitcardmayhem

Just got my email from Octopus my Electric is unit rate stays the same, but SC up by 3.28p/day .
That’s IOF ….

mmmmikey

QrizB said:

Alnat1 said:

The problem is that everyone has electricity but not everyone has gas. 

One option that could be defended as "fair" would be to put the levy in the unit cost, as a carbon tax.

Keeping to round numbers, electricity is about 100g of CO2 per kWh while gas is 200g. For off-grid folk, LPG is about 230g and kerosene (heating oil) is about 270g.

Carbon credits are traded at about £50 per tonne, 5p per kg. If we used that price, we'd be adding 0.5p to a kWh of electricity, 1p to gas, 1.15p to LPG (8p per litre) and 1.35p to kero (13.5p per litre).

I'd support that, and it would also have the effect of reducing standing charges which would be popular.

Scot_39

Alnat1 said:

The problem is that everyone has electricity but not everyone has gas.

If the costs were transferred to gas accounts the government would need to increase the amount each user pays in order to generate the same income.

Can't see that going down too well with those who would need to pay more.

Maybe they could get away with a gradual switch over several years?

Anyone consuming electric is going to be paying more - c£100 more by 2029 GE in certain media - for balancing and curtailment in cap.

This caps £15 - really only another sign of what's to come under the 95% by 2030 policy.

And if split into units and SC - all electric homes likely tom see even more on the lower £1179 pc2 cap.
Even £100 is 8.5% - over the 2% official inflation target compounded over 4 years (and remember their was £51 non wholesale costs added to Oct df dd ave regional cap - wholesale down £15ex vat, total up £35, not just the £15) - imposed not by market wholesale pricing but by govt renewables policy