Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
This article is the latest part of the FT’s Financial Literacy and Inclusion Campaign
Energy saving tips are an increasingly hot topic — no matter your level of income.
Following April’s 54 per cent increase to the energy price cap, I expected my bills to increase, but I wasn’t expecting my monthly direct debit to more than double.
My supplier claims this is based on my current usage and will prevent my account from being in the red by the time autumn arrives — at which point, energy prices are forecast to soar further.
I’ve challenged the 112 per cent increase, although I could afford to pay it. Others are dealing with the “price shock” of soaring bills by cancelling Netflix subscriptions; AJ Bell has warned people are investing less; retail sales are plummeting and consumer confidence has plunged to a near-record low.
But what if you have no slack in your budget?
Gemma Hatvani is a woman who knows. Made redundant after working as a business analyst in the energy industry for 16 years, she set up a Facebook group — Energy Support and Advice UK — to help people struggling to pay their bills.
“I wanted to give something back, and use my knowledge to help people — and it’s grown and grown,” she says.
The group’s 15 full-time volunteers include energy experts and heating engineers advising on how to get bills down — plus what to do if you can’t afford to pay.
Its community of 50,000 members share tips about the benefits of bleeding radiators, installing timer switches to turn off broadband routers at night and hanging curtains over doorways to stop drafts.
However, the heartbreaking extremes to which some go to cut their consumption and save money caused the group to go viral this week.
“Leave a bowl of water in the sun with a black bin liner on top and it will be warm enough to wash up in later,” was one tip widely shared on Twitter, highlighting the miserable reality of life for those who cannot afford to top up expensive prepayment meters.
Hatvani is aware of the increasingly desperate lengths people go to, including going to bed fully dressed, using candles placed on a gas hob to heat food, storing leftover boiled water from the kettle in a Thermos or building a homemade hay box (a thermal cooking technique from the postwar era).
“I keep having to remind myself it’s 2022,” she says. “It’s like Bear Grylls out there — we’re talking about survival.”
Numbers in the Facebook group have surged since April’s bill hikes, and are set to increase further now that Martin Lewis, founder of Money Saving Expert, has become a member.
He has been warning for some time that lower income households will either “freeze or starve” this winter unless more government help is forthcoming. This week, the bosses of the UK’s biggest energy firms told MPs of the “totally horrific” consequences if the price cap rises from £1,971 to the expected level of £2,600 in October.
By then, Eon expects up to 40 per cent of its customers to be in fuel poverty — spending more than 10 per cent of their income on energy bills — the House of Commons business, energy and industrial strategy committee heard on Tuesday.
Keith Anderson, chief executive of Scottish Power, said the crisis was moving “beyond what I think this industry can deal with”, adding the firm had been contacted by thousands of customers unable to pay their bills since April’s increases, even as consumption falls during the summer months.
Chris O’Shea, boss of British Gas owner Centrica, said the number of customers late with payments had risen by 125,000 to 716,000 over the past year.
The goings-on in Hatvani’s group are a sober reminder of the toll this is going to take on the personal finances of millions of people.
There are hundreds of posts a week now from people who cannot afford huge increases to their direct debits, who are seeking advice about how to challenge energy companies. Hatvani’s sister has seen her unit rate for gas climb by over 600 per cent after coming off a fixed-rate deal. “Her supplier wants £500 a month for gas and electric, which is totally unaffordable and more than her rent,” she says.
Faced with huge increases, growing numbers of members are saying that cancelling their direct debit and paying what they can every month is the only way they can still afford to live — despite the dire financial consequences.
Expert volunteers point out this will immediately make bills more expensive, wiping out the direct debit discount most suppliers offer, and could prematurely end advantageous fixed-rate deals.
As energy debts mount up, Hatvani foresees millions more households being pressed to switch to more expensive prepayment meters, where they are charged for energy usage upfront. This week, she spoke to a young family who had resisted having one installed, only to be issued with a warrant by their supplier to enter their home and fit it (the cost of this will be added to their debts).
Commonly used as a debt management tool, 4.5mn UK households pay for their energy at point of use — and if they can’t afford it, the lights will literally go out.
“Energy companies love prepayment customers, as they get their money straight away,” she says. The charity National Energy Action has predicted that hundreds of thousands of households will manage the bill shock by voluntarily “self disconnecting” and surviving for days with no heat, power or hot water in an attempt to balance budgets.
If people are reduced to living like this, you can see what’s feeding the grim trade in tips involving bowls of water and black bin bags.
And the squeeze has only just begun. Politicians, energy companies and charities are all crying out for more to be done — but the big question is: what?
It’s obvious that measures outlined in the Spring Statement won’t be anywhere near enough for the poorest families to get through the winter. One idea gaining traction is a deeply-discounted “social tariff” for customers considered “vulnerable” or in fuel poverty that would knock £1,000 off annual bills.
There are no easy solutions to funding this. A 10-year clawback, imposing a windfall tax on oil and gas companies, scrapping the price cap and charging middle and higher-income households much more for their power have all been suggested this week.
With bad debts rising fast, we can’t wait until October to decide. The extreme energy rationing highlighted by this Facebook group should spur those in power to get ahead of the next phase of the crisis well before temperatures start to drop.