July is set to bring another welcome fall in gas and electricity prices for domestic consumers.
The price cap – the amount paid by a typical household on a duel fuel, direct debit deal – is set to fall by 7% on the previous quarter, and is the second successive fall in the price cap. But welcome though this decrease is, the energy crisis is by no means over.
Even with the respite in recent months, typical home energy costs are currently 39% higher than in winter 2021/22. This is a significant hike in outgoings for everyone but especially low income households who spend a larger proportion of their budgets on energy than higher income households. Looking ahead, most analysts anticipate that energy prices will rise again in October 2024, with a further small rise early in 2025 before stabilizing for the rest of the year. Far from high energy prices coming to an end, they are now baked in to the cost of living.
The energy crisis has hit people in Wales particularly hard – and will continue to do so – through a pernicious combination of extra costs, off gas grid homes, poorly-insulated housing and below average incomes.
On top of high standard costs, households in Wales pay a premium for their energy. In North Wales, households pay 26.25p a day more than households in London simply to have an electricity supply to their homes – around £100 a year. They also pay an extra 0.73p for every unit of electricity they consume – equivalent to an extra 7.3p a day on typical use or an extra £27 a year. Households in south Wales also have above average electricity costs, although not as eyewatering as those in the north.
As well as paying more, households are more reliant on electricity than in many other parts of the UK. Across large areas of rural Wales it is the norm not to have a gas supply: 74% of households in Ceredigion, 55% in Powys, 52% in Ynys Mon and 49% in Gwynedd were estimated to be off the gas grid in 2022. In the absence of gas, electricity consumption in these areas is higher than average.
And then there is the state of Wales’s homes. Those cute country cottages and striking valleys terraces are actually incredibly energy inefficient, leaking expensive heat through their uninsulated roofs and single skin brick walls. Wales has the most energy inefficient homes in the UK. In 2017/18 a house condition survey found that just 28.3% of homes were in Band C or higher, by 2023. Using the energy performance certificates of homes sold, the proportion in Band C or higher was 41.3%, the lowest proportion in England and Wales. In other words, more than half of homes in Wales are wasting a lot of energy.
Together, high costs and leaky homes make for big bills – and on average households in Wales have less money to pay them. Household disposable income per head is the lowest in the UK, more than £3,000 a year less than the UK average in 2021, leaving many households really struggling.
There are few signs of either the Welsh or UK governments being able to provide another round of support with energy costs, leaving people in Wales facing a cold and costly winter. Many energy suppliers offer extra help to people struggling to afford their heating bills, from hardship funds to repayment plans to heated blankets in the winter, as well as delivering on their energy efficiency obligations. The Bevan Foundation is reviewing the various schemes, not least as people tell us the schemes are hard to find and don’t address the fundamental problem of bills being unaffordable. We will be sharing our findings in readiness for winter 24/25.
