Energy Bills: Ofgem Lowers Energy Price Cap | Good Morning Britain

foreign average 70 per cent less for

energy

from this summer after the

energy

regulator reduced the maximum

price

to 2074 per year for someone with typical usage Energy regulator chief executive Jonathan Braley joins us from now in Westminster

good

morning

Jonathan, you must be happy to I will be announcing better news for once. Good

morning

, absolutely, it's

good

to announce that given the massive drop that we've seen in the cost of gas, the electricity that we buy,

price

s are going down from what we thought were two and a half thousand pounds a year. until 2074, but as you know Martin, given the changes we are seeing in government support, this is still a figure much higher than what people were paying just two years ago and I know that means that many families will continue to struggle to pay . their

bills

, so it's a step in the right direction, the market is stabilizing, but there is still a lot we need to do to support, in particular, those customers who are going to struggle this winter.

Well, forgive me, I'm not going to use the typical ones. I used numbers because I think they don't make sense to most people. I'm going to say it's a drop of 17. If you were paying a hundred pounds, you'd now pay 83 pounds. And you are right that the government supports the fall. what you have doesn't make up for the £66 a month the state was giving out over the winter that's gone but that's not in your remit but the standing charge is the biggest complaint I get about energy

bills

and the standing charge the very high standing charge is not going down you are making the cut for the unit rate let me read to you my standing charge for electricity went from P25 per day to P47 per day last year what is the justification for that and When can we wait for it to fall again?

A lot of anger about that, why haven't they left it well? What is paid with the permanent charge are two things very well in general, it is a fixed cost in the system that is in part the cost of our networks, in particular our electricity networks, but they are also the operating costs of the companies themselves . What we are saying today is that we are opening a conversation about half of that cost, that operating cost, which is about £150 of the roughly £300 standing charge a year. year and we are going to ask two questions: what is the right set at the right level, but we should also move it from permanent charge to volume charge and that is one way we can start to have that debate, but this is not simple, since You'll know, Martin, that last year we looked at another element of the standing charge and we asked the same question and said, "Well, should we just put this into unit rates?

The problem is always that when you do that, there are many, many." poor families who have great energy needs partly because their children may have special needs or partly because they have disabilities and that change harms them a lot, so we are going to analyze it, we will ask ourselves a question and we will do it publicly to find out opinions about it, but only a warning sign, there is no easy answer here if you move costs from one part of the bill to the other, yes there are winners but there are also people who accept that it is a moral hazard to help people pay £300 per year to have the possibility of having gas and electricity because when they have fewer users they can no longer cut back.

Well, that's part of the reason we're opening up this question about operating costs, but what we're trying to reflect on. They are the costs of the system as a whole, so it is something that we are going to analyze. The other thing we're doing. The government has already intervened to equalize prepaid meter rates, for example, we are going to look at permanent charts for prepaid meters along with this, so we are going to ask some very important questions about permanent charges, but that it's going to take time to resolve now the next big thing that always comes to mind, people look at the charts, they see that the wholesale rates are a fraction of what they were and their price is only going down by 17 people, I don't think that be enough now I know what your answer will be on this, but it's you who should give it to me, not me, okay, of course, well, let's start Martin, looking at what the price is.

The real cost of our energy is for that average home, so the costs for that typical home right now are three thousand two hundred pounds. The government is paying £700 of all our bills at the moment and that's what brings it down to two thousand five hundred now, when If we take the total drop in petrol prices, which is about £1,200 in total, that's the decline that we are seeing, but part of that is the end of government support that also ends in July. The other thing is that we ask the companies. buy forward in the market, so they are not buying our energy for July right now, they are starting to buy our energy for later in the year.

Now, what protected us from last winter, when prices were extremely high? four five or even six thousand pound notes in the autumn of last year, but that means that price falls take time to manifest. The good news is that when the price goes down it will last longer, so let's say prices will increase next week, which will also take time. to feed and the advantage we have with the price cap at the moment is that we don't have the old world, as you remember, Martin, where people used to describe it as throwing a stone and then prices would drop like a feather, so let's go. rises quickly and then falls very slowly, this formula is basically the same in that sense, so the prices related to the wholesale market have the same time to arrive whether they go up or down, so the maximum prices fall around 40, but I only feel 17 because the previous price was already subsidized and the reason people pay more is because you pressure them to pay in advance, but what I have noticed in your statement currently takes into account that the companies of energy can make profits of 1.9 and I think people I will be surprised to know that you are advising to increase the amount of profits that energy companies can make and that is not the best time.

Alright? The reason we are doing it is because there are three things we must do. this winter, just for starters, one is fair price regulation, but the second is ensuring the sector is financially resilient, so you'll remember everything we went through at the end of 2021 and that put around £80 on bills people when 30 companies went bankrupt and What we are saying to all companies is that you need to have money in the bank, you need to have good risk management, you need to have money in the bank to be able to withstand the types of price shocks that we have seen in the last two.

They've needed to get that money from somewhere for years, so we're saying we're putting in place roughly an increase of about £10 a year to make sure companies are financially resilient, not to benefit shareholders, but to make sure that that customers don't face much higher costs if companies fail um and I'll leave it to that in a moment, but I just want to finish finally, we have a wicked and broken energy market in the UK, that's one of the reasons why we've had these high costs is that we set the price of our electricity based on the highest generation cost, not the actual generation cost, we set it based on the cost of gas when it has been increasing.

I mean, if we fix that, our prices should drop substantially, when is that going to happen? the government has a process in place, ultimately that kind of change requires legislation, but it takes time, this is a very, very complex market, so implementing something is a quick fix that usually ends up with a lot of unintended consequences, for so we are working with the government to make the changes that you describe to see if we can find a better system that reflects that. I would say one thing: since 2017, the contracts we have had with renewable generators in particular are, in fact, fixed price, so they are not affected. because of the price of gas, it's the old contracts for the new generation that we need to review, as Martin said, this is the happiest I've seen you in a long time, so it's good to have some good news, when will this end?

What do people feel? Are we in this now? Will it come to an end? And when you look, you'll know that we've seen a massive shock to our market. We saw Russia withdraw a lot of gas from the market and that drove up prices last year. They are recovering but, as always, it is incredibly difficult to predict what might happen in the future, so prices are going down, the market is stabilizing. I should add that we are hopeful, Martin, that we will see fixed prices enter the market in the second half of this year, but predicting when prices will fall back to where they were is extremely difficult.

I think it will take time. I'm going to take the opportunity to tell you about one of the biggest problems with the return of fixed pricing: today, most companies do it. This is because of existing customer rates, not open market rates, and that's why they don't have to publish their rates, so someone like me can't help people, people can't go to comparison sites to see how they compare, will they change the rules so that energy companies have to publish all their rates, including those of existing customers, please, let's take a look at that and come back, we see the problem, what else What we were really worried about were companies that offered rates outside of their company, so they keep their customers on a high rate and offer cheap rates to attract customers to the company later, but this is all about transparency for us. , so we can't, we can't commit to it properly.

Now Martin, but we're happy to see you. I will call you on the phone in a week or two and we will have a further discussion. We'll talk to you and then thank you, thank you Jonathan.