Energy crisis information page
This is our Energy Crisis information hub.
Here, you can find support, resources and blogs covering everything you need to know about the energy crisis.
Blogs and resources
What are we doing to help in the energy crisis?
We're working with the government and across the energy industry, pushing for policies to spread the higher energy costs over time and give extra support to those who need it most. At the same time, we're looking after our own customers:
- Through the crisis, we've kept prices as low as possible, repeatedly cutting into the very small amount we charge to cover our costs . In normal times, we typically charge customers a slim 5% margin on top of wholesale energy to cover our business costs and reinvest in growth. In the crisis, we're not even doing that. Instead, we've absorbed £150 million of the high energy costs last year to keep them off peoples' bills.
- We've got extra help for those who need it most through Octo Assist. We created our customer help fund when the crisis took hold to directly support those who need it most, with initial funding of £2.5 million. This quickly doubled to £5 million as the crisis worsened, then to £7 million. Now, we'll be increasing that support to £15 million.
Read on for answers to the most common-questions we've received throughout the crisis so far:
Frequently asked questions:
Why would a supplier with 100% green tariffs be impacted by fossil fuels prices?
Green electricity now costs less to generate than fossil fuel power. So shouldn't that mean green power costs less to buy on the market?
Because of the (very flawed) way the market is currently set up, sadly not, though as the grid gets greener, this should change.
The price power sells for is dictated by the going rate for all different types of energy. At the moment, the UK's outdated wholesale market has a single price for electricity every half hour (which energy suppliers need to pay) and its usually mainly determined by the cost of gas. All energy sources in the UK, from wind to solar to fossil fuels, are being sold based on the high price of gas imports – the higher price of 'brown' electrons artificially putting up the price of 'green' ones as well.
🏠 In short, It’s like selling a house; the price is set by what neighboring homes are sold for, not the actual cost of building the house.
Renewable energy will make electricity a bit cheaper this year – in fact, turbines are generating so much cheaper than the current wholesale price that they're due to pay suppliers back for the extra they've earned ( £39 million up til now, but it could be lots more in the year ahead.)
We need much more renewable generation in the system, and the market should be reformed. Our CEO, Greg, talks about it more here.
How can Octopus support you if you're struggling to pay?
If you’re struggling please, please reach out. From our Octo-Assist Fund to our electric blankets and thermal cameras, Octopus have a range of personalised options available if you need support. Visit our financial support blog for more information.
Are energy suppliers like Octopus making a massive profit right now?
No – we haven't made a profit since we've been in business, and we won't this year either. We usually reinvest any small margin we make to expand our business: either by bringing green power to more countries, or driving system change by investing in low-carbon technologies and research, or energy generation.
But throughout the crisis, we've instead put that money into helping customers even more.
Like using £150 million from our own reserves to keep bills lower by swallowing more of the high cost of power. (That's evident in our new Flexible Octopus tariff, which is £50 below the price cap for existing customers – the cheapest of any major supplier).
We've also invested in schemes like the Winter Workout, which led 250,000 customers to collectively save over £4 million in gas bills with simple tips.
And most importantly, we've focused direct support where it's most needed, with a £15 million dedicated fund to give bill relief to customers who are struggling the most to pay.
Why aren't we profiting from the high cost of energy? Because we're not an energy producer. (Well, not a major one anyway, yet: we do have two turbines with enough power for 800 homes). We buy energy wholesale, or where we can, buy it directly from UK producers: in both cases, any profit goes to those producers. Not us.
We have a renewables investment business, but we still don't own generators like wind farms directly. Thousands of investors do, so as a business we don't get this profit either.
Why won't Octopus go bust?
While 21 energy suppliers have gone bust over the course of the crisis, we're not going anywhere. Our cutting edge operating model and world leading tech have allowed us to direct millions of pounds towards supporting customers during this crisis, and safely take on customers from other bankrupt suppliers. If you want to know more, this dedicated blog can tell you exactly how Octopus is built to last.
Why can’t energy suppliers charge less?
More than 90% of the costs of your energy bill are out of the control of your energy supplier.
The vast majority of that 90% is defined by the price of the wholesale energy we have to buy from the global market, but that 90% also includes taxes, VAT, and payments to companies who maintain the UK’s energy distribution system (the pipes and wires that transport gas and electricity).
Why are standing charges increasing, not just unit rates?
Energy markets are highly regulated, so as an energy supplier we get charged certain costs for every single customer we have; even if they don't use any energy. These costs are passed on to customers via standing charges.
Costs have increased to cover expanding environmental and social schemes like Warm Home Discount - which will be available to more people this year, so costing more overall - and the ECO scheme. Plus, other things, like the administrative cost of taking over the customers of suppliers who've gone out of business, and some distribution costs moving from unit price to standing charge.
Recent regulatory changes - Ofgem's Targeted Charging Review - have increased those costs even more: which we opposed.
Our CEO Greg explains more here:
The electricity standing charge increase is driven by two changes to how much it costs us to supply your electricity. The first is the cost of failed suppliers (sadly its more than usual this year because half the retail market went bust in 2021). The industry has changed how customers are charged for using the distribution network – the cables that deliver electricity to your home. The costs of these networks have been moved from the unit charge to the standing charge.
Some of the increase in electricity standing charge is also due to the increase in the rollout of the Warm Home Discount which is set to be available to more people this year.
Gas standing charges have increased slightly, but not as much as electricity. This is because although the cost to cover failed suppliers is split nearly equally between the fuels, for gas this cost is added to the unit charge rather than the standing charge. The increase in gas standing charge is primarily due to extra Warm Home Discount costs.
Ofgem have broken down the up to date split of costs that make up a typical energy bill here
Why do standing charges vary based on where you live? It costs different amounts to get power to homes in different parts of the country. Each of the electricity distribution networks (DNOs) face different costs to maintain, upgrade and operate their networks. These costs are shared among their own customers, i.e people who live in the region where they operate.
How does the Government's £2,500 Energy Price Guarantee work?
On the 8th September, the government announced a significant support package to help with energy costs this Winter. This freezes the annual bill for a typical household at £2,500.
It will save the average household about £1,000 per year compared to what they would've spent on a tariff at the maximum October price cap (£3,549).
You don't need to do anything to access the Energy Price Guarantee: it'll be factored into your energy tariff, so you'll get the savings automatically.
Find out more in our dedicated Energy Price Guarantee blog.
Is the £2,500 figure from Ofgem the maximum price I can pay for energy?
No: this figure is not the absolute maximum a customer could pay. If you’re affected by the price cap, the protection you receive is relative to how much energy you use.
Ofgem calculates the price cap based on the yearly usage of a typical medium consumption home (that's 2900 kWh of electricity and 12000 kWh gas per year). It represents the maximum amount Ofgem considers fair for energy suppliers to charge customers on variable tariffs.
This figure is used by suppliers to apply the price caps protection against each customer's actual usage. Put simply: if you use more - or less - energy than that typical home, your own yearly energy costs on a tariff priced at the maximum rates may be higher - or lower - than that £2,500 figure from Ofgem.
What if I can't pay my energy bill, or keep getting into debt?
Please, please get in contact with us if you’re struggling with your bills. There are many ways we can help.
We have loads of helpful information online about what to do if you're struggling to pay, including this step-by-step guide.
If you fall into debt for any reason, we can assist by:
- Providing some breathing space — maybe in the form of a short term deferment of payment
- Working directly with our team on a repayment plan that suits you
- Adjusting your payment methods to find one that works best for you
- Pointing you in the direction of experts who can help advise on your debt
If you're an Octopus customer, you can also access our Financial Support form here – a quick and simple online tool which asks you a series of questions about your financial situation. We can offer a number of support options based on circumstances and need, including access to existing schemes, monetary support from the fund, or a loan of a thermal imagery camera to find heat leaks at home.
If you're struggling, please reach out to us
Get in touch to talk through all the different ways we're supporting customers through the crisis. We created a £2.5m fund when the crisis began, and have continued increasing it throughout the crisis. The fund has already helped tens of thousands of customers with specialised support, and after the October price cap rise was announced, we doubled it again from £7.5m to £15m. If you're an Octopus customer, access our financial support tool– a quick and simple online tool which asks you a series of questions about your financial situation, income and expenditure.
We can offer a number of support options based on circumstances and need, including access to existing schemes like free electric blankets, energy efficiency visits, monetary support from the fund, or a loan of a thermal imagery camera to find heat leaks at home.
Published on 3rd August 2022 by:
Hey I'm Constantine, welcome to Octopus Energy!
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