Escalating Energy Prices – Impact and Actions
31 Mar 2022
The impending rise in energy bills for about 22 million consumer across the UK has been a much debated topic of conversation ever since Ofgem announced the increase of the energy price cap. Energy bills contribute significantly to the expenses of an average household and with the inflation at a record high, this is causing a sharp rise in the cost of living within the UK.
Why are we where we are?
According to the senior analysts of the Natural Gas sector at the International Energy Agency, the historic plunge in global energy consumption in the early months of the Covid-19 crisis since early 2020 drove the prices of many fuels to their lowest levels in decades.
But since then, they have rebounded strongly, mainly as a result of an exceptionally rapid global economic recovery (this year is on track for the fastest post-recession growth in 80 years), a cold and long winter in the Northern Hemisphere, and a weaker-than-expected increase in supply.
The energy price cap was introduced by the UK Government via Ofgem in 2019 as an attempt to regulate a free trading energy market and to provide protection to millions of energy customers across the UK. This enabled to ensure they paid a fair price for the energy they used to power their homes. However the latest review of the energy price cap, taking into account the global scenario of demand and supply as well as geopolitics, has necessitated the astronomical increase of 54% from 1st April 2022.
What can landlords do?
The current energy performance of your asset is available in the more current Energy Performance certificate. The certificate also provide excellent overview of recommended actions, the costs associated with such actions and the likely change in the energy performance rating on account of such actions.
The Oxford City Council has proposed active plans to encourage all rental properties in the area to have a minimum rating ‘C’ for energy performance by 2025. Therefore taking proactive action towards improving the energy performance will have a dual pronged benefit of making your property more desirable to tenants and also meeting with the energy performance objectives.
Various recommendations include –
1. Insulation: Both internal and external – adding an additional layer of insulation in the loft and checking for or upgrading the cavity wall insulation has immediate impact on the property
2. Floor insulation – checking whether floor insulation is possible and if yes, then its cost benefit analysis to compare impact on performance as against expense to the landlord
3. Solar photovoltaic panels – a popular choice for landlord via the green energy deal. With the government announcing elimination of the 5% VAT component over time, this could again become an attractive option
4. Double glazed windows – many older properties in Oxford have historic double glazing or in many instances still retain single glazing. A sympathetic change of glazing keeping in line with the age of the property but providing better energy retention could be explored
5. Low energy bulbs – fitting the property with energy saving low energy bulbs will have a positive impact on energy consumption.
What can tenants do?
In the Spring 2022 budget, the government has acknowledged that many UK households are likely to need support with rising energy bills in the immediate term and has announced a rebate package which is to include discount on energy bills in autumn of 2022, Council Tax rebate and discretionary funding for those not eligible for this rebate. Specific details can be found here.
Ofgem has strongly recommended that consumers speak with their suppliers to understand the changes to their tariffs and also discuss alternatives available based on their historic consumption. It is essential for every supplier, according to Ofgem rules, to have these conversations with consumers in order to assuage their concerns and find the best tariff suitable to them.
In addition, small changes around the house can offer significant energy savings such as –
1. Turn down your thermostat – turning down the main thermostat by 1 degree has been found to not compromise of your comfort but can reduce your energy bills almost immediately by nearly 10%
2. Change to low energy bulbs – choosing a low energy bulb every time you replace a blown bulb around the house could lead to savings of up to £5 per year per bulb
3. Reduce tumble dryer usage – tumble dryers are a modern comfort which notoriously have very high electricity consumption. If your home is fitted with one, reducing the usage by drying clothes outside will bring in savings.
4. Check for draughts and cold spots – draughty doors and cold spots in the house can cause your home to lose heat rapidly. Check around your home to see if you can identify such areas and inform your landlord or managing agent for further action.
Further practical tips and hints can be found at the Simple Energy Advice service offering government endorsed advice, especially helpful videos such as this. These small changes all add up to clever energy savings helping reduce your energy bills and improve the energy performance of your home.