Energy bills on the rise – will students be cushioned?

Earlier today Ofgem announced that the energy price cap will rise by a whopping 54%.

Jim is an Associate Editor at Wonkhe

This directly impacts default tariff customers who haven’t switched to a fixed deal, and those who remain with their new supplier after their previous supplier exited the market.

Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year, on average. Prepayment customers will see an increase of £708 from £1,309 to £2,017. These are big numbers.

This will have major impacts on plenty of students (and staff) – we had a think about some of those impacts a few weeks back on the site.

In Parliament, Chancellor Rishi Sunak announced a three-pronged approach to helping those faced with soaring bills, and it’s worth thinking through whether any of them would help students.

First, a “smoothing” mechanism. The “Energy Bills Rebate” will provide an upfront discount on bills worth £200 – energy suppliers will apply the discount to domestic electricity customers from October, with the Government meeting the costs. The discount will then be automatically recovered from people’s bills in equal £40 instalments over the next five years. This will begin from 2023, when global wholesale gas prices are expected to come down.

For students in HMOs there’s no clarity at all on how that will work – will that debt recovery mechanism track them around different houses in subsequent years? What will happen when one housemate takes on the bills on behalf of the group? What about international students? What about students whose landlords pay the bills? And so on.

Second, the Chancellor confirmed plans to go ahead with proposals to expand eligibility for the Warm Homes Discount by almost a third so that three million vulnerable households will now benefit, as well as the planned £10 uplift to £150 from October. This follows a consultation by the Department for Business, Energy and Industrial Strategy to reform the policy so that more people will benefit. Sadly, this is linked to being a universal credit claimant – and most full time students aren’t entitled to it.

The third component is that households in England in council tax bands A-D, will also receive a £150 rebate, made directly by local authorities from April. This will not need to be repaid. The problem of course is that for full time students away from home, they’re generally exempt from paying council tax. So that won’t help.

To add to that, a discretionary funding pot of £144 million will also be provided to support vulnerable people and individuals on low incomes that do not pay council tax, or that pay council tax for properties in Bands E-H. Sunak did say in Parliament that students would be able to apply for help via that route – but local authorities are likely to have lots of calls on the cash and considerable discretion in how that’s applied, Sunak later confirmed that there would only be “guidance” on targeting, and remember many redirected students to university hardship funds when a similar discretionary pot was created to mirror the statutory Covid isolation payments back in 2020.

“Local authorities will be able to use that to help those low-income households that happen to live in higher council tax band properties and those people, such as students, who are exempt from paying council tax at all, but whom we would want to get that support to.

Universities and their SUs would do well to start lobbying local authorities now to make sure students are written in clearly in these local schemes and that they are advertised clearly on campus.

As council tax is devolved, so is this component with some Barnett consequentials – so who knows whether there will be explicit announcements that include students around the devolved nations.

Just for some context on this, yesterday the German cabinet approved plans for a one-off payment to help alleviate higher energy bills for around 2.1m people. Most students/apprentices will personally receive a €115 payment, and housing benefit recipients will get €135.

Back home we don’t, of course, know how many students might be impacted and in what way – working that out is the job of the Department for Education, which hasn’t carried out any research into student income and expenditure since 2014. We asked DfE for a comment on what students are supposed to do to get through this, and they just bounced us to the Treasury. We’ll update here if we get a response.

One response to “Energy bills on the rise – will students be cushioned?

  1. The biggest effect will be on shared house students who might be too young to pay much attention to their bill only to find it suddenly shooting up. If you have 4 people living together each using their own TV or Computer together with shared amenities it will become quite expensive.

    For the students who choose to stay in all-inclusive halls/private student accommodation then it might fall to the company involved to take a hit on their bottom line. It is unlikely they will raise ‘rents’ (ie rent+bills) in the middle of semester.

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