Working from home to add £900m to energy bills

Millions of British households should be prepared to face “an onslaught of bruising energy bills” due to working from home, the cold weather and the energy price cap hike by Ofgem, a new report warned.

Personal finance website Forbes Advisor UK estimates that around 7 million UK households could spend an extra £900m ($1.3bn) on gas and electricity just by working from home during the pandemic.

It based this on its research that showed almost 12.5 million (38%) Brits are working from home, with the majority of these (82%) doing so as a direct result of the COVID-19 pandemic.

It found that around 57% homeworkers have used more gas and electricity than usual to heat and power their homes, causing them to spend an additional £127.88 on their energy bills.

Another 14% have spent more than an extra £200.

On top of this, the freezing weather that has gripped the UK over the winter months, and the energy price cap increase from Ofgem will mean soaring energy bills.

The regulator said that its price cap for Britain’s 11 million households that are on their supplier’s default tariff could rise by £96 to £1,138 from 1 April.

READ MORE: UK businesses face post-Brexit surge in energy prices

“Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic. We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy,” said Ofgem chief executive Jonathan Brearley earlier this month.

This more than wipes out the gains that households made in October, when the price cap dropped by £84 to a record low since the policy was introduced in January 2019.

Ofgem reviews and changes the price cap once every six months.

The price cap increase has already proved to be a target rather than a limit, with the UK’s biggest suppliers, including British Gas (CNA.L), E.on (EOAN.DE) and EDF (EDF.PA), announcing that they intend to raise their prices to meet the level of the cap.

With energy costs typically being paid in arrears, the next bills that are due to land in people’s mailboxes could therefore come as a shock.

Kevin Pratt, personal finance expert at Forbes Advisor UK, explained that “those with standard variable rate, or ‘default’, tariffs will be clobbered by the price cap rise in April if they stay put, so they really should be thinking about switching to a cheaper alternative as a matter of urgency.”

“Many of us pay the same amount by direct debit each month, which can sometimes mask the impact of high usage on our bills. But sooner or later any accumulated deficit has to be cleared,” he warned.

Brearley also earlier said that "the price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal."

Meanwhile, another report said last week that factors such as increased transportation costs and the UK leaving the EU internal energy market means businesses will see an increase in energy costs as a result of Brexit.

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