The first Warm This Winter Tariff Watch report was published on 1 July 2023 by the Warm This Winter campaign in partnership with Future Energy Associates (FEA). It estimates that household energy suppliers could make £1.74bn in profit over the next 12 months from customers' bills, and sets out how the profit suppliers are allowed to make on the average variable tariff customer has changed over six years1.
The permitted profit per medium-use dual-fuel household on a single-rate standard variable tariff rose from £27 in spring 2017 to a high of £130 in early 2023, and stood at £60 per customer at the time of the report. The £1.74bn figure is derived by extrapolating that per-customer profit across all 29 million households, and reflects the level of profit permitted under Ofgem licence conditions. It excludes profits from fixed-term tariffs and from Ofgem allowances for Covid true-up and Ukraine wholesale cost adjustments. The report states that Ofgem is looking to increase the permitted profit margin further, to as much as 2.4% from later in 20231.
The report also records changes in the number of tariffs and suppliers. In the first few months of 2023 there were just five fixed tariffs available to small sections of the market; in July alone that number doubled, with 10 fixed tariffs newly available. In April 2023 there were 26 energy suppliers offering customers tariffs, rising to 29 in July 20231.
On the standard variable tariff, the report gives regional averages for standing charges and unit rates1:
| Region | Electricity | Gas |
|---|---|---|
| Highest standing charge | Manweb (Merseyside, North Wales, parts of Cheshire), 65.8 p/day | Scottish Power and Scottish Hydro, 33.9 p/day (£124/year) |
| Lowest standing charge | London, 41.9 p/day | Not reported |
| Highest unit rate | Seeboard (South East), 33.2 p/kWh | Swalec (South Wales), 7.73 p/kWh |
| Lowest unit rate | Yorkshire, 31.1 p/kWh | East Midlands, 7.34 p/kWh |
The average electricity standing charge was 56.85 p/day with an average unit rate of 32.1 p/kWh. The average gas standing charge was 33.5 p/day, and the average gas unit rate fell by 27.7%. Electricity standing charges were unchanged from April to July, and gas standing charges were unchanged in every region at 29.11 p/day, meaning households in July, August and September were still paying record high standing charges1.
A spokesperson for the End Fuel Poverty Coalition, part of the Warm This Winter campaign, said:
"This report shines a light on the murky depths of Britain's broken energy system. Without fundamental overhaul of the energy grid and energy tariffs, households will continue to lose out while suppliers will profit."
Why it matters for households
The report puts numbers on two things that shape a household's energy tariffs and its control over them. The first is the profit allowance built into the price cap: because it is a percentage of the total bill, it rises and falls with wholesale prices, so the amount permitted per customer grew from £27 to £130 and then fell back to £60 as wholesale prices moved. The second is regional variation. Standing charges and unit rates differ by network area, so two households with identical consumption can pay different amounts, and the report notes that standing charges stayed at record highs through the summer quarter1.
For a home's energy independence, the report's figures on fixed tariffs are the practical part. It records more fixed deals entering the market and more suppliers offering tariffs, and FEA forecasts that some one-year fixed tariffs with a low exit fee and unit charges of 6.5 p/kWh for gas and 30p/kWh for electricity might suit some high-use households. It also states that the current best variable deal could be with two different suppliers, Home Energy for gas and Fuse Energy for electricity, saving £93 a year for direct debit households against the Ofgem price cap. The report adds that other customers are advised to stay on variable tariffs for now, and that single-fuel deals may pose risks to households less vigilant about tariff prices1. The report does not give a figure for how many households are on fixed tariffs, and no date has been reported for the next Tariff Watch report beyond the plan to run it quarterly1.
What happens next
The report states that further data on the impact of standing charges will be published in future Warm This Winter Tariff Watch reports, and campaigners plan to run the report quarterly as the energy crisis continues. Ofgem is looking to increase the permitted profit margin to as much as 2.4% from later in 20231.
Sources1 cited
- Energy suppliers could bank £1.74bn profit in next 12 months, endfuelpoverty.org.uk