To worry that people think the price cap means unlimited energy

[Shortjanet]

I've read quite a few comments here where posters seem to think fixed or capped energy prices mean that you can pay a set or limited amount for unlimited energy. It's quite worrying to think how much debt people might run up. The way the headlines are describing it as "bills capped to £x" or similar is helping to fuel the misunderstanding (no pun intended) I think. AIBU to wish the media were being clearer that caps and fixes apply to each kWh used and standing charges, not the total you can pay.

I totally understand the ‘fixed’ prices means but I admit I am struggling with this prices are capped at £2500’ I need it explained like i’ 5 too!

Currently use & pay £85 worth of combined G&E per month (obviously before Oct increase) so what will this mean for me?

Financial literacy is shocking in the UK. It shouldn't be the job of the state to bail out the financially illiterate. Unfortunately increasingly it is people don't need to be financially responsible they can have children they can't afford, heat homes bigger than they can afford and even buy on mortgages bigger than they can afford. If they genuinely can't understand the price cap and what it means then quite simply they will have to put up with what's coming and I won't loose a wink of sleep about it.

@StarDolphins instead of looking at how much you pay now, look at your usage and what your unit price is. These are made up numbers but if you’ve been using, say 50 units (KWH) a day, at 5p each, and the unit price is going up to 12p per KWH, that’s how much more you’ll pay

@StarDolphins the cap is on how much they can charge for each unit

You need to know how much energy you use.

Your bill should have an estimate of how much gas and electric you use in KWH a year.

The price you pay for each KWH is fixed.

It's confusing as - going to the carrots and potatoes explanation - the price you pay for a carrot (gas) or potato (electricity) is fixed. But you will use more carrots in the winter months for heating (if you have gas central heating).

So at the moment, each KWH of gas you use is 7p and each KWH of electricity you use is 27p

No one knows what will happen on October.

BUT THE MORE YOU USE, THE MORE YOU PAY

Apparently the average reading age in the UK is 9: amp.theguardian.com/uk/2006/jan/24/books.politics

49% of working age adults in the UK only have the numeracy levels expected of children at primary school: www.nationalnumeracy.org.uk/sites/default/files/documents/nn124_essentials_numeracyreport_for_web.pdf

It’s actually quite scary, so many people leave school without the tools they need to understand and analyse information,

Agree with @JulesCobb here. We can’t be taught absolutely everything and frankly, most of us forget the majority of what we learn at school anyway. Most people are unlikely to leave school and get a mortgage - that comes 10-15 years down the line for most people.
If you have a solid enough understanding of maths you should be able to figure out how mortgages work, how energy bills work etc with a small amount of effort.

It’s fantastic more of this sort of stuff is being taught these days but adults need to take responsibility themselves too. Just because I wasn’t taught how an energy bill works at age 13 doesn’t mean I can’t use basic maths skills as an adult to figure it out.

I think it's fairly clear and idiot proof but you know what they say: make something idiot proof and the world makes a better idiot

Yes I was, and as an adult I have taken responsibility and found out for myself about mortgages, credit cards, how fuel bills work etc. But I've only been able to do that because I had the basic math skills and a level of intelligence that allowed me to understand what I found. Someone who doesn't have either the basic maths skills or the level of intelligence is going to struggle to understand no matter how much research they do.

Just because I wasn’t taught how an energy bill works at age 13 doesn’t mean I can’t use basic maths skills as an adult to figure it out.

But many people don't have those basic maths skills so will struggle to figure it out.

The way it's reported is in my view 100% of the reason so many people don't understand.

Saying the cap is being raised from £x,000 to £y,000 is as someone said up thread criminally irresponsible comms. It means nothing, but - crucially - appears to mean everything. The figures are so specific that they imply that this is the maximum a house could pay for energy, rather than an average example. I don't blame people at all for misunderstanding this.

It needs to be properly spelled out as "Today the price cap on one unit of electricity (1kwh) is X. In October it will be Y."

They could then say, "an average 3 bed household uses X number of units per month in the summer, and Y per month in the winter."

The rises are so high that no household will be able to cut their usage enough to even get down to their previous costs, let alone below them. If people are bowling into the winter thinking, "well I'm going to make the most of my increased direct debit and have the heating on all day," then the messaging from government and reporting by the media has been comprehensively fucked up and is downright dangerous.

The education system does not teach financial understanding -

It is far easier for people to not understand and make profits

I love maths and spreadsheets - I have each months projected usage plus variables for costs per unit of gas and electricity and I have put in scenarios for modelling percentage reductions.

I also understand exactly how energy is used in the house.

I can see what's coming and am ready for it.

The 'price cap' is more confusing as energy usage clearly varies through the year - especially with gas - and this is why it can clearly be seen that this winter is going to be hard for people as the cost of the gas they use will be more than double than last Christmas. People will have hardly had the gas on over summer and won't have seen the effect of April's gas price rise much yet.

Ive just made this point on another thread, exactly this, why on earth does this keep getting reported in terms of a cost per year, when nothing is average when it comes to energy costs because there is no average home, average area, average lifestyle, average number of people in the property etc etc

Its hugely irresponsible the way this has been and is being reported and referred to.

You have to look at what your current unit price is and what your yearly estimated usage is based on the last year

Then you can work out based on the new capped rates how much this coming year will cost (although it will be goinng up again in January)

If you are on a fixed rate now, you need to work out when that will end

If you say you are using 85 pounds worth, then that will obviously go up anyway in winter because its summer now

Although, we don't seem to have heard from the 'at least petrol hasn't gone up, I put £30 in every week like I always have' brigade yet.

It's weird, isn't it, because almost everybody understands the principle with petrol and diesel. Most people know that a bigger or faster car will not do as many miles as a smaller or more ordinary one, and thus they realise the inherent choices they make that mean they will pay more or less to fuel their car.

I like to think that the 'doesn't affect me because I always put £30 in' folk are just trying to make a silly joke, but I wouldn't put it past some not to quite get it. It's similar to the other old one, where an 80yo will claim to be much fitter and stronger than they were at 20, because they can easily carry £10-worth of shopping in one hand now, whereas 60 years ago, they would have needed a wheelbarrow to move shopping costing £10. Surely most people are just being silly/jocular, aren't they?!

The media cut to the chase and just go to the shortcut capped price based on average usage, but this will indeed go over a lot of people's heads. It might help if they made a conscious effort to stress that a unit is going up from Xp to Xp, meaning that people using the average household amount will thus pay £X, but it's too long and clumsy for the headlines.

Plus, people hear the unit price of 7p and that sounds negligibly cheap; then they hear that it's going up to 15p, and that also sounds too cheap to worry about. It's true that a single unit is cheap, but your total bill isn't when you're using tens of thousands of them!

I think it's very unkind and unfair to label people as fools for this and say that they deserve what they get if they don't understand. Different people have different strengths and weaknesses. I always rein myself in and tell myself, when I receive an invoice from a tradesman that's full of terrible spelling and poor phrasing: "I wouldn't have made all of those mistakes. I would have presented a SPAG-perfect invoice. However, give me a hundred years and I still would never have had the faintest idea or ability to begin doing the perfectly and efficiently-executed job that's just been done, to which the invoice relates."

But you were taught skills on how to read and research. You cannot possibly be taught everything you need to know ever by the age of 16. At some point adults needs to be responsible for finding out these things for themselves.

@JulesCobb well said

@cakeorwine can you put your spreadsheet into a Google drive and share it. Would be really handy. And fascinating to know how many people use it.

Alternatively a template on Notion, if you are that way inclined.

I've just heard them say price cap of £2500 on BBC breakfast news. It sounds exactly like no household will pay more than that amount. The reporters need to be held to account as it is so easy to be confused by this.

YANBU. It is worrying how many people seem to lack even basic understanding.

They are in for a shock.

Explain to me like I’m 5 please
what does the price cap mean in real terms

Energy = Freddoes

Currently 1 Freddo costs 25p.

Price cap means chocolate companies will not be allowed to charge more than 50p per Freddo over the winter.

But the more Freddoes you eat, the more you'll have to pay.

(Standing charge is like paying road tax to get to the shop. It's the same whether you buy any Freddoes or not. People get het up over this. Last winter my standing charge was <10% of my overall bill)

I work in the financial sector, my boss thinks the cap means unlimited energy for that price in the same was a £20 phone contract means unlimited texts. Yes, a lot of people working in the financial sector shouldn’t be there!

See yes even a supposedly educated person (teacher where I work) said this yesterday re the ‘fat cats’ - BBC is completely irresponsible by people just want sound bites and ate too lazy to hop befitting the headline.

I agree with this, also working bin financial services, it is scarry that many do not have basic maths skills.

I don't know whether this is helpful for people, but I was looking at our household energy usage and stumbled on this website.

If you have smart meters (or know your approx annual usage) it will be able to tell you how much it is costing:

www.theenergyshop.com

I was a little surprised that they seemed to have a pretty accurate record of our supplier and what we were using once I told them our address (but that's a whole different thread).