Autumn Budget 2025: Energy bills to fall £150 from April 2026

MattMattMattUK

Chrysalis said:

wakeupalarm said:

So according to the figures on MSE news story, Rishi Sunak and his swimming pool will get considerably more than £150, whilst a low user will get considerably less than £150.
Were these policy costs not added to standing charges?  So why are they coming off unit rates?

This change will make standing charges even more of a dominant portion of low users bills.

I think it needs someone to probe to get this information to see if already was on the unit rate or not.

The RO makes up around 75% of the reduction, it is applied to the unit rate. ECO is a bit more complicated because it has a market share component, but it is mostly on the unit rate. VAT is obviously 5% across that and makes up the balance.

Chrysalis said:

If the announcement uses wording like average or typical, that would suggest unit rate.  Just looked at the MSE article it is unit rate, if it already was on the unit rate though then its logical to remove it from there, but I agree they playing games if these were previously on the SC.

A small component of ECO is on standing charges, but the impact of it's removal will come off of the unit rate, none of that is playing games.

Chrysalis said:

The thread title is very misleading.

It is just simplified and headlines/thread titles/article titles are limited in characters, the detail can go in the body text. They could have added "for typical users", but constantly adding things like that to headlines gets clumsy, repetitive and in most cases adds little if anything as the detail is in the body text.

High energy users will benefit more from this change, particularly those who use a lot of electricity, those who use a lot of gas will save much less. So those with solar panels who already use little to no imported energy will save very little if anything, those with electric heating will save more than those with gas heating. We do not know how itnwill apply to EV or ToU tariffs yet, so it may benefit EV users more, or it might only be the peak rate that gets reduced, not the off-peak rates. I do not know if Sunak's swimming pool is heated by gas or a heat pump, most are gas fired, but if it is gas fired he will save very little, if he runs it on a heat pump from imported energy then he will save comparatively more. 

Ildhund

MattMattMattUK said:

The RO makes up around 75% of the reduction, it is applied to the unit rate. ECO is a bit more complicated because it has a market share component, but it is mostly on the unit rate. VAT is obviously 5% across that and makes up the balance.
...
A small component of ECO is on standing charges, but the impact of it's removal will come off of the unit rate, none of that is playing games.

I'd love to know where to find the documentation for this. I wasted a long time today trying to find out how policy costs are split between standing charges and unit rates for the price-capped SVT. I failed dismally, because Ofgem sent me in circles. I can guess how much was in the 'typical' standing charge in 2023: about 10% of the ~£185 total for electricity, for example:


[Standing Charges: Call for Input]

I can also dig out how much suppliers are charged, I think:


[Annex-4-policy-cost-allowance-methodology-v1.22.xlsx]

But I haven't been able to find out how to get from the one to the other. Anything you'd like to share?

MattMattMattUK said:

They could have added "for typical users", 

That would have helped, I think. Ofgem explain the difference between the 'average' and the 'typical' household. There's an important difference, which many commentators seem to be unaware of. Ofgem's typical consumer is one that 50% of consumers use less than and 50% more, the median value. This is what they say:

Most consumers use relatively small amounts of energy, while few consume large amounts. The median or second quartile is more representative of the typical “medium” usage. We use the first and third quartiles to represent typical “low” and typical “high” usage respectively. The lower quartile reflects the annual consumption that only 25% of all consumers use less than. The higher quartile reflects the annual consumption that only 25% of all consumers use more than.   

Sorry for taking up so much room; like many others, I'm wondering how much of this £150 reduction in my electricity bill will materialize next year.

MattMattMattUK

Ildhund said:

I'd love to know where to find the documentation for this. I wasted a long time today trying to find out how policy costs are split between standing charges and unit rates for the price-capped SVT. I failed dismally, because Ofgem sent me in circles.
...
But I haven't been able to find out how to get from the one to the other. Anything you'd like to share?

I am out and about today but I will try and dig out what I found later, but I totally agree, Ofgem go out of their way to obfuscate how the policy costs are actually applied.

Some of what I read requires trying to cross reference different documents to figure it out, particularly the cost of ECO which is not a straight up amount, but rather a total figure calculated based on market share, which sits within an initial soft calculation. My notes in a spreadsheet when trying to figure it all out show that it is roughly 2.8% of the total bill, applied evenly across the standing charge and unit rate, because of that a 2.8% reduction in the standing charge is comparatively little (45p per month, plus 2.25p VAT saving) saving, where as a typical user will save more from their usage (around £3.58, plus 18p VAT saving), although that obviously scales with usage. 

I have drafted up a FOI request which I will be sending to Ofgem in due course to ask them to fully lay out the details within the headline components of the energy costs, including their full calculations. I am interested to see if that reply will match my figures from trying to read between the lines in all the other documents they publish. I will share it on here if/when they respond. I want to get it in soon so I can compare the before and after figures from this change. 

Ildhund

MattMattMattUK said:
...I totally agree, Ofgem go out of their way to obfuscate how the policy costs are actually applied.

I have drafted up a FOI request which I will be sending to Ofgem in due course to ask them to fully lay out the details within the headline components of the energy costs, including their full calculations.  

Great! I'm sure they will have had to respond to similar requests from the media, if no-one else. Looking forward ...

BTW, You'll have noticed that in the blurb below the title of the Aggregate costs table, Ofgem admit that even they don't know for certain what suppliers are charged. 

Scot_39

Is it just me - or does that annex 2 mean - those on all electric are only paying half the WHD support those on duel fuel pay ?

I have looked at the old rates pre Oct as well (c£11) and the increments - c£8.4x and c£3.41 - seem to be half the increments quoted in the Ofgem cap letters for the last quarter and next (the £17 and the £7)

Sadly Ofgem don't do a seperate annex in the letters for the profile class 2 cap - well not in the recent 2 anyway - to better break down its costs - and especially given they have gone up far faster in % terms than the dual fuel - like last quarters £34 iirc (3% vs DF 2%) and next quarters £51 (4.3% vs DF 0.2%).

Often it seems policy favouring the c85% of homes on dual fuel with lower electricity use - but on this one item - perhaps a small saving ?