Welsh households are grappling with the highest energy bills in the United Kingdom, as household energy suppliers eye a staggering £1.74 billion in profits over the next 12 months. The unsettling picture of energy poverty in Wales was revealed in the inaugural Warm This Winter Tariff Watch report, a collaborative effort with Future Energy Associates (FEA), which hopes to provide insight into the inequalities present in Britain’s energy system.
Over the past six years, the profit allowances for energy suppliers have surged from £27 in 2017 to a peak of £130 in early 2023 on the average customer with a variable tariff. The figure currently sits at £60 per customer, indicating a sustained increase in profit margins for energy companies. The anticipated profits over the next year are expected to be driven by EBIT (earnings before interest and taxes) and headroom allowances within the price cap.
The report underscores regional disparities in energy costs and savings, with northern Wales facing the highest bills in the UK and southern Wales closely following as the second-highest. The analysis reveals that electricity costs in north Wales are notably elevated compared to other regions, while in the south, it is the soaring gas prices that contribute to the financial burden on households.
The report highlights the urgent need for a fundamental overhaul of the energy grid and tariff structures. The predicted profits of energy suppliers for the next year alone could potentially cover the costs of a ‘help to repay’ energy debt scheme, leaving a quarter of a billion pounds surplus.
The lack of transparency in how regional variations are calculated is a significant concern, demanding a clear explanation for the pricing strategies applied across the UK. The Welsh government has launched a campaign, ‘Here to Help with the Cost of Living’, to reassure people that help, and support is available for households across Wales who are struggling to pay their bills.
With reference to the cost of living crisis, Richard Allan, the founder of Warmable, a utilities company that offers boiler service in Cardiff and across Wales, explains that “consumers must be cautious when they see new energy deals and comparisons.”
“Some one-year fixed-price tariffs and variable deals from specific suppliers are identified as potentially offering savings for high-use energy users but prices are subject to change.”
As the energy landscape undergoes swift changes, including falling wholesale prices and the emergence of competitive deals, questions remain regarding potential profiteering by suppliers and the regulator’s role in promoting competitiveness. The report underscores the need for ongoing efforts to address the root causes of the soaring energy prices faced by households in Wales.