Martin v Ofgem boss: Why are energy bills so high (is it green levies?) | Scrap standing charges | Is the Price Cap a rip-off?

It’s Martin v Ofgem this week (well, Jonathan Brearley, the boss). Martin asks Jonathan why energy bills are so high, about scrapping standing charges, who funds the regulator, writing off energy debt, issues around green energy, and loads more. It’s a jam-packed episode, also including what Martin thinks about O2 raising their prices by more than they promised, and what you should do if you’re affected. If you have a question for Martin, you can ask him in his Question Time podcast! Email your question to [email protected] mailto:[email protected] and you could be on the show!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  This BBC podcast is supported by ads outside the UK.

• 0:06Speaker 01

  Cheers to fall savings at Whole Foods Market, home of higher ingredient standards. This Halloween, share chocolates and candies made without that spooky high fructose corn syrup. Throwing a party? Make it easy with a berry chantilly cake. Ready to cook pizza? No antibiotics ever chicken wings. And sushi made fresh daily. Fall gatherings never tasted better. Save through November 3rd at Whole Foods Market.

• 0:33Speaker 02

  Sometimes we all need an extra helping hand, especially with the tricky business problem you've been putting off. Claude is an AI for just that. It's a collaborator that understands your entire workflow and thinks with you, not for you. And Claude isn't just for quick questions. Hand it a whole task like turning a folder or scattered notes into a report, and it does the work and hands back something finished that you can open and edit. Claude can now draft a doc or deck right in front of you, and Claude Design now lives right inside Claude. Describe the website or prototype you're picturing, attach your design system, and it comes back in your own design language, ready to edit right on the canvas. It works with your files and the tools you already use, like Gmail and

• 1:16Speaker 02

  Slack. And whether you're debugging code at midnight, building a financial model, or strategising your next business move, Claude extends your thinking to tackle the problems that matter. For problems worth solving, get started with Claude at claude.ai/solve. That's claude.ai/solve. And check out Claude Pro, which includes access to all of the features mentioned in today's episode. claude.ai/solve.

• 1:44Martin Lewis?

  Hello, I'm Martin Lewis and this is the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. Now, usually much of it comes from my BBC Radio 5 live show with Adrian Charles, but there's also bonus money-saving tips just for you lucky, lucky podcast listeners. And today is a special. We're joined by Jonathan Brearley, boss of energy regulator Ofgem, to take my

• 2:10Martin Lewis?

  And your questions, some nice, some not so nice. Including, can we scrap standing charges? Why are our energy bills so expensive? How much do green levies really cost? And when will they start to lower bills? Why are firms allowed to make so much profit? And is the price cap a rip off? We even got a question sent in by the former Secretary of State for Energy, which prompted me to ask, how much do politicians try and intervene? And why didn't she ask it when she was his boss? Plus, O2 is hiking its price hike, raising prices by more than it said it would when people signed up. This makes a mockery of another regulator, Ofgem's Consumer Protections. So what can you do if you're an O2 customer?

• 2:54Martin Lewis?

  And what should the government do now O2 has broken this taboo? To prevent other mobile and broadband firms following suit. There's a lot to get through. Enough of me telling you what's coming. Let's get on to actually doing it. Play the theme tune.

• 3:21Speaker 04

  Martin, I'm led to believe it's the nine year anniversary of your 10,000 step goal. So what was that to do 10,000 steps every day, no matter what?

• 3:29Martin Lewis?

  Yes, it is. And I've managed to succeed on every single day, apart from the 2nd of August 2023, when I had food poisoning and at 10 o'clock at night, I was so desperate to get my 10,000 steps. I managed to crawl out of bed. I got to the front door and my legs crumbled underneath me and I had to go back to bed. So with that one blip, two years and about 30 days ago, I've done 10,000 steps every day. And this year, this year, I'm looking for the first time. I normally average 25,000 steps a day to average 26,000 steps a day. I'm on track for it, or more accurately, I'm on carpet for it. I'm on pavement for it. I'm on road for it and I should make it. Yeah, but my streak with one exit, with one exception.

• 4:08Speaker 04

  That's annoying, that.

• 4:09Martin Lewis?

  So frustrating. It's nine years now, nine years.

• 4:12Speaker 04

  And how far short were you on that day?

• 4:14Martin Lewis?

  Oh, I only managed to 2,000 steps. I mean, literally it'd been coming out both ends, Adrian. And I'm a leg. Legs were wobbly and weak and I was still determined. My wife was going, what are you doing? Get back to bed. As I've got to get my 10,000. I got myself down the stairs, holding on to the banister. I got myself, I walked out, I got to the front door.

• 4:32Speaker 04

  Heroic. These seas have been one for less.

• 4:34Martin Lewis?

  Genuinely, legs wobbled and one of the legs buckled and I was on the floor and she went, bed. That was it.

• 4:40Speaker 04

  Right. I think that was a good decision.

• 4:44Speaker 04

  So, O2 raising prices.

• 4:47Martin Lewis?

  Yeah, well, this is more than raising prices and I'm, I'm quite angry about this. I'm quite angry at both O2 and the regulator. Let me explain what happened. In, for years, one of the biggest complaints in my mailbag has been about above inflation mid-contract price hikes on mobile broadband and pay TV. I was one of those leading the lobbying for this. I've written to chancellors in the past about it, saying, we just need to ban above inflation price hikes during the contract. It's not about limiting the market. This is about saying, once you sign up for a contract, you need to know they can't put the price up. Well, Ofgem came up with its own structure, its own solution. Its solution was to say, and this came into place in January, that what firms would have to do is when you sign

• 5:30Martin Lewis?

  up for a new contract, they would have to tell you in pounds and pence any raises during the contract period. So, for example, they'd say, you're paying 10 pounds a month now and in April 2026, it'll be 12 pounds a month and in April 2027, it'll be 14 pounds a month. So, there was a transparency of you know what you will pay. Now, what O2 has done is it had told people, both new signups to contract, but also it's like people who'd signed up before that because they were on a planet, had informed them, it was going to increase prices by 21 pounds a year from April. What it's now done is got in touch with them and it said, we're actually going to increase it by 30 pounds, which is a 40% increase. So, the whole of the Ofgem plan was that people would know exactly what they would pay throughout the entire contract.

• 6:16Martin Lewis?

  O2 has run roughshod over that. And the reason it can do it is it's also saying, but if you want to leave, you can leave penalty three within the next 30 days. And that enables it to do this. Now, for me, this fundamentally breaks Ofgem's plans. It fundamentally means that its entire result and system, which was to say you must have a transparency of what you'll pay, has gone down the water. And the big problem is, once one firm breaks the taboo, once one firm crosses the Rubicon, we are very likely to see other firms doing it. And this isn't just an issue for O2 customers. It's an issue for anyone who has a mobile contract, a broadband contract, a pay-TV contract, because the door has now been opened.

• 6:59Martin Lewis?

  And it's an issue for the economy. Because by putting these prices up, that is inflationary. It increases inflation. It's an issue for the chancellor in her budget, which is why I've just pressed send on the letter to the chancellor, copying in the head of Ofgem and cutting in the head of the Department of Science, Information and Technology. Because unless we crack down and tighten up those rules and allow this circumnavigation, we are going to see big rises. And what's fascinating here is the whole big thing is, Ofgem was lauding it because it said, we have banned inflation-linked mid-contract price rises. Now, by them being inflation-linked, what that literally says is you can't say in the contract, we will put prices up by 3% more than inflation.

• 7:42Martin Lewis?

  But it hasn't stopped above inflation price hikes. These O2 rises, even in the most generous way, are 7% for people on the most expensive contracts. But for people on the cheapest contracts, these are a 30% increase in what they will pay year on year. Inflation's 3.8%. This is what, eight times inflation? It's massively inflationary. And it's absolutely incredibly frustrating. As somebody was saying to Ofgem, just ban them putting up the rates by more than inflation within a contract. Someone was saying you shouldn't be allowed to put them up at all. That it's chosen this hybrid form of regulation for transparency, which has now turned out to be flaccid. And it needs to urgently be stopped.

• 8:26Martin Lewis?

  O2 customers, prices are going up, but likely it means the door is open for all of us to now see price increases by more than we were told when we signed up, which was meant to be what the guarantee was.

• 8:38Speaker 04

  Presumably you've been on to Ofgem.

• 8:40Martin Lewis?

  I mean, I've just, the letter goes to Ofgem. I mean, I put stuff out on this yesterday. These rises have been coming in. People are very annoyed. The big thing people, the consumers, need to understand is they do allow you to leave penalty free. So, once you get this letter, you have 30 days. Now, that's interesting. It's 30 days from getting the letter. The rises happen next April, but it's 30 days from notification. So, if you don't notice till next April, it's too late for you to leave penalty free. Information overload means many people will miss that. Many with separate handset contracts were worried about cancelling because it's a separate to their airtime contract. This is very poor for vulnerable customers and older customers who tend not to churn and switch. It's poor for those who feel trapped by the signals or they're my big tip. You're now free to leave. You either haggle with O2 for a better deal. You get yourself onto a comparison

• 9:25Martin Lewis?

  site. I mean, you can, you can pay, you know, take 75% off the price in many cases of what O2 are charging you. And the likes of GiftGaff and Sky and Tesco all use O2 Signal. So, if you want to keep O2 Signal, have a look at what Sky, GiftGaff and Tesco are offering you because then you can keep the same signal and ditch O2. And remember, you can ditch them now. You don't have to wait to the end of your contract. This, this needs to change. This is, this is, it's a busted philosophy. Ofgem's done. You know what? Jonathan, I hope you don't mind. We've got the boss of Ofgem. Just to be very clear, he's the energy regulator. He is not the telecoms regulator. But you are a regulator.

• 10:02Speaker 05

  Yes.

• 10:03Martin Lewis?

  If you would put provisions in place and you'd seen a firm circumnavigate, would you react? And how quickly could you actually react on something like this? Do you have to go through consultations to change it? So, it's not possible to do it quickly?

• 10:15Speaker 05

  Well, I mean, and good to be here this afternoon, Martin. Look, we'll do energy in a minute, but let's, let's get your expertise on that. And I've got to emphasise, I know nothing about this case. And my colleague Melanie Dawes, who runs Ofgem, I'm sure is all over this. I think-

• 10:27Speaker 04

  Okay. Can I just say, Martin, what Ofgem have said? And I'm not asking Jonathan to comment on it, but just to-

• 10:32Martin Lewis?

  Yeah, yeah.

• 10:33Speaker 04

  They say, Ofgem have said- They're disappointed by O2's decision. This goes against the spirit of our rules, which are designed to ensure greater certainty and transparency for customers when they sign up. Today, we've written to the major mobile companies, reminding of them of their obligations to treat customers fairly. We encourage any customer who wants to avoid these price rises to exercise their right to exit with a penalty and sign up to a new deal.

• 10:59Martin Lewis?

  But it doesn't say O2 can't do it.

• 11:01Speaker 04

  No.

• 11:02Martin Lewis?

  That's the problem. So Jonathan, could you change the rule? How quickly could you change rules if you wanted to as a regulator?

• 11:06Speaker 05

  It does take time because we have legal requirements to consult and then you have to have a period of time when you bring it in. But it kind of highlights a really big problem. You know, what regulators and industry need to do is have a conversation, not just about the letter of the rules, but what are we trying to do here? What's the spirit of this? Now, if you're saying the spirit is transparency and making sure all of us busy people know what we're paying when we sign up, then clearly you want to have a conversation between O2 and Ofgem to find a way to resolve that. The problem is, Martin, if we keep writing more and more detailed rules, because companies find different ways to get around them, the rulebook grows. And I think you've got to move to a place where the industry and the regulator have a sensible conversation together.

• 11:44Martin Lewis?

  But you can talk about the spirit of the rules all you like, but if they're not obeying the spirit of laws, you don't have any power to enforce it unless you go through a consultation and change them.

• 11:51Speaker 05

  Yes, but you do have, you know, and certainly in the energy sector, we have principles. So we have principles that say, look, this is what we're trying to achieve. So for example, we have principles around transparency, we have principles around fairness, and we have principles around things like accuracy around bills. Now, if you don't have the detailed rule, you can say to companies, look, you're going against some of these principles. But it is complex and to be honest, I found if industries keep trying to circumvent rules, rules do get more and more detailed and in the end, you end up with a massively long rulebook on both sides. This is really about, frankly, industry taking responsibility and realising.

• 12:25Martin Lewis?

  But their job.

• 12:26Speaker 05

  Us busy customers.

• 12:26Martin Lewis?

  So I go for it and this takes us to where we're going on energy. So let me be really plain. I don't, and I'll talk energy, but mobile's the same. I don't believe it is Centrica, British Gas's job, or O2's job. It's not Centrica's job to keep me warmed over the winter. It's not O2's job to keep my mobiles down because both of those are public limited companies whose primary job is to make money for shareholders. It's your job as a regulator and politicians' jobs as overseeing regulators and putting its structures in place to protect us. It's your job to make sure that vulnerable people don't mind the winter because of misbehaviour by companies. That's what you're there for. Relying on them to have the right spirit doesn't feel, doesn't feel strong enough to me.

• 13:07Speaker 05

  Well, look, we've done this. So when we've seen companies break rules, we have fined them. We have tackled, for example, if you look at a company, E.ON, a few years ago, weren't answering their phones. Fifty percent of their customers weren't having their calls answered. They ended up paying a redress payment. They've now changed that call waiting times have come down. So we do act. My point is really simple. Okay, if you're British Gas or O2 or any regulated utility, if you play that game, the regulator has no choice but to come down hard on you and to keep driving different rules to make it sort of more and more detailed as to what it is you do to run your business. If we want a sector that is going to innovate and change and do all the good things they're doing for customers, we need to take responsibility on both sides. And I've been doing this job for six years.

• 13:49Martin Lewis?

  So then-

• 13:50Speaker 05

  And I believe that conversation is as important as the very detail rules you have behind you.

• 13:54Martin Lewis?

  So then, and maybe just letting people underneath the lid of this. So my job as, let's say, a consumer advocate is what they're called, something like someone like I does in the States. What I am doing with O2 is I'm ramping up the pressure on O2 and the regulator because and writing to the Chancellor and making this public. And my job is to say, and I wonder as a regulator, am I helpful or am I harmful? By me ramping it up, does that give you as a regulator in the room, it's almost sort of like, well, look, we want to make this work. And we've got Martin Lewis on one hand going mad at us to say, you've got to fix this. So all your nice industry talk of, oh, we want to do it this way, you can't have it your own way because there's pressures coming from the other side too. I sort, I see that as a balancing factor.

• 14:39Martin Lewis?

  Is that, is that right?

• 14:40Speaker 05

  That is massively important. I mean, you, charities like Sis' Advice, you know, other people that come in and make these points really help us understand, you know, you see just as well as we do where their strength of feeling, where things need to change. And also, if I take someone like Sis' Advice, they have something called the extra help unit where people who are really struggling go, that's a great source of data for us to say actually what's going on in the sector.

• 15:02Martin Lewis?

  So the pressure I put on helps you in the arguments with the firms when they're trying to put pressure the other way?

• 15:06Speaker 05

  Well, and it helps us, yes, both and also make sure we're on top of our game. We're doing what we need to do to protect customers.

• 15:12Martin Lewis?

  Okay, well, we've got loads of questions to put you on top of. Adrian, we should probably do the formal introduction now, shouldn't we?

• 15:17Speaker 04

  Well, actually, before we do that, we'd better just get over what O2 have said. Demand for mobile data is at an all-time high. The annual rise of £2.50 a month around 8p a day continues to represent excellent value for services. And they're investing £700 million into their mobile network this year to meet growing demand.

• 15:38Martin Lewis?

  I'm glad they're not making any profit then, they're putting all in investment.

• 15:40Speaker 04

  It's reassuring.

• 15:45Speaker 04

  Go on, let's do the introduction.

• 15:48Martin Lewis?

  You do the formals, after you.

• 15:50Speaker 04

  Okay, so we have Jonathan Breely with us, chief executive at Ofgem, as we've heard. I suppose if you, so my question for you, if you meet somebody, you meet somebody on a train who asks you what you do for a living, how do you explain in the simplest terms what you do, what a regulator does, who you regulate?

• 16:08Speaker 05

  Yeah, as a regulator, you're here to set the rules and make sure those rules are fixed for the industry. Now, if you take some of the big things that we do, I know the price cap, I know you call it the pants cap, Martin, but it's there to protect people from high prices if they don't switch tariffs to other customers.

• 16:24Martin Lewis?

  And just to say why I call it the pants cap, its job is protecting vulnerable people who will never switch, I absolutely support. The problem is, two-thirds of people are now on it, people who would switch, it's pants if you can engage in the active market, and I know you agree with that, you should get off it.

• 16:40Speaker 05

  100% agree with that. So that's one example.

• 16:42Martin Lewis?

  And just in the podcast extras, I'm going to be going through all the practicals on what you can do to cut your energy bills, but we're doing more policy with you today.

• 16:48Speaker 05

  That's great. And so that's part of it, that's setting the rules, making sure, for example, that the overall companies are providing a good service to customers. And the other thing we do is we provide the funding and the targets to build out the energy system. So particularly, all those pipes that bring the gas to your house, all those wires that bring electricity to your home, we make sure that they're funded fairly, but also that those companies deliver.

• 17:08Martin Lewis?

  What do you regulate and what don't you regulate?

• 17:13Speaker 05

  In, we regulate the retailers, the people that buy and sell your energy, but they are at the end of this whole big system.

• 17:19Martin Lewis?

  But the companies we pay.

• 17:20Speaker 05

  Yeah, they're EDF, your British Gas, Octopus, the ones you see out in the market. What we don't regulate is the gas market, so where you buy your gas from as a country, or where the electricity is generated. We do something around how the market functions, but not the price that's paid. And then we also set the funding and also the targets for those network companies, those companies that are building the infrastructure that brings the energy to your house.

• 17:43Martin Lewis?

  So you're at the end of the path, not the beginning.

• 17:45Speaker 05

  Exactly.

• 17:45Martin Lewis?

  So, and I know we're going to get questions on this. So the giant profits that are made tend to be by oil and gas companies.

• 17:51Speaker 05

  Exactly.

• 17:51Martin Lewis?

  That's not your lot. The companies that went bust in the energy crisis are the retailers that you regulate.

• 17:58Speaker 05

  Exactly. So that's right. And that was a good example, where if you look a few years ago, we were regulating all sorts of things, but we weren't looking hard enough at their finances. What we now do is we regulate them a bit like the banks, to make sure they have the enough money in the company to manage in all different circumstances.

• 18:13Martin Lewis?

  Now, where I'd like to go next, and I gave you, just to tell everyone, I gave you pre-notice of this question, because I think this, everything else that we're going to go to comes from, stems from this. I would like you to tell people what is, their bill is made up of. What are the different elements that they are paying for when they pay a typical energy bill? How much of it is past debts? How much of it is green? How much is paying for the actual gas and electricity? How much is network and distribution? Because I think that, that sort of cements where we're going to go and some of the discussions we're going to have.

• 18:43Speaker 05

  Yeah, exactly. Well, look, imagine that you're a typical dual fuel customer. You have a gas heating system and you have electricity for everything else. For every £100 you spend on energy, here's how it breaks down. So roughly 40 out of that 100, that's buying in that wholesale market, a bit like Tesco's going to the warehouse, that's buying your gas and your electricity from those who generate it and those who dig it out of the ground. About 25 are the networks, so that's the infrastructure that brings that energy to your house, out of 100. Then about £12.50 of that, that's, that's the cost to run the industry, to keep the companies going, and also to pay some of the fees that are involved in, in transactions. About the same amount, about £12 is what we call. Policy. So that's levies for low carbon generation.

• 19:27Speaker 05

  But also some of that is money that we all pay so that we provide some support to vulnerable customers through something called the Warm Home Discount. That's about two pounds out of that twelve.

• 19:35Martin Lewis?

  So twelve pounds, because this is this is getting into the more controversial bits for people, twelve pounds. Two pounds of that twelve is to pay for the Warm Home Discount, the hundred and six million people who get a hundred and fifty pound discounted off their electricity bills. And many people, this year it's expanded a lot, people are under your benefits.

• 19:51Speaker 05

  Yes.

• 19:51Martin Lewis?

  Is the remaining ten all to use as a subrogate green stuff?

• 19:55Speaker 05

  Pretty much. I mean, it's insulation as well as green energy. So there's lots of different things, but it's pretty much all around.

• 20:00Martin Lewis?

  What's the split between insulation and green energy, do you know?

• 20:02Speaker 05

  I think it's probably the majority green energy.

• 20:04Martin Lewis?

  Right. So so for those people who ask, and this is a big issue for some people, eight pounds of your hundred pounds are the green subsidies, if you like.

• 20:12Speaker 05

  Yes, exactly.

• 20:13Martin Lewis?

  Okay, exactly. Carry on, sorry.

• 20:14Speaker 05

  The rest of it, five pounds is tax, that's your VAT. And then we allow the companies out of that hundred to make about two pound fifty profit. Then there's another column of kind of gubbins, I've called it, which is about three pounds.

• 20:26Martin Lewis?

  So Helen asks, we were told that the daily standing charges were increased in part due to the collapse of some energy firms and the subsequent debt. When will that debt be paid off? How much is it? And will the standing charge rates come down? So how much of people's bill is is the firms went bust?

• 20:42Speaker 05

  So right now, that's gone from the bill. So that was something we paid in twenty one, twenty two, went up to about eighty pounds in that period. But that's now come off the bill. Now, you know, it depends what happens.

• 20:53Martin Lewis?

  Have people seen bills come down because of it? They haven't, though.

• 20:56Speaker 05

  Well, because the.

• 20:57Martin Lewis?

  I mean, it's a ceteris paribus, they probably have, to use an economic term, which means everything else remaining equal, they've come down, but lots of other things have gone up.

• 21:03Speaker 05

  And, you know, particularly network costs have gone up. And of course, this this industry, like every other, has seen inflation.

• 21:08Martin Lewis?

  You've just said particularly network costs have gone up.

• 21:10Speaker 05

  Yep.

• 21:11Martin Lewis?

  Why and what does that mean?

• 21:13Speaker 05

  Well, there's two, there's two parts of it. First of all, you know. The way you pay for networks is linked to inflation and clearly we've had higher inflation over that period. But also, we are doing two things. You know, we're making sure this network gets maintained properly. So, you know, all those people digging up the streets that you see sort of near your home blocking up the traffic, they're all there to make sure that the network that we have is maintained. But also, we are building new infrastructure to make sure we can connect all of this new energy across the country. So that's the kind of, that's the reason why that that was going up. And also-

• 21:44Martin Lewis?

  So does that mean because we've got all these wind plants and solar plants, now that they're tough to connect them to the grid, they weren't connected to the grid, so we don't benefit from them, we're now paying so that we we can plug them in to keep it simple. Okay. And that's part of, and that's gone on all our bills. So this is, this is infrastructure investment in renewable energy, part of that.

• 22:01Speaker 05

  Exactly right.

• 22:02Martin Lewis?

  So I'm just, I'm sorry to labour this, but I get so many pro and angry messages about this. So you've got your eight pounds, which is your green subsidies.

• 22:10Speaker 05

  Yes.

• 22:11Martin Lewis?

  But then there is also a cost for plugging renewables in on top of that. Any, any idea how many pounds on my bill that is roughly?

• 22:17Speaker 05

  So I think that's hard to identify because that's kind of mixed up in the two. But I, but well, let me tell you how I see the whole bill, since we're-

• 22:23Martin Lewis?

  Yeah.

• 22:23Speaker 05

  You know that we've seen vast changes in the price cap over the three months. Martin, we've talked about 150 quid up, 400 pounds off over the last few years. Pretty much all of that has been that wholesale cost element. That's about buying and selling gas in a short place over time. Now, what's, and are we hoping that over time that might come down? That might come down because gas prices might come down. And it also might come down because at least once you've built your wind farms, they're pretty much free to generate your electricity. But going up slowly over time are two things. First of all, is that charge on networks. So we are investing in networks to make sure we have this new energy system. And also, you know, those policy costs to get that green energy will go up slowly as well. So what we are seeing is this kind of volatile piece over

• 23:07Speaker 05

  here that's caused a lot of the real distress we saw over the last few years. And that may come down a bit.

• 23:12Martin Lewis?

  And that's wholesale rates. That's the mark, how much it costs on the world market.

• 23:15Speaker 05

  Exactly.

• 23:16Martin Lewis?

  But we'll be coming to how you set that later on, price of gas and all that. I've got questions on that.

• 23:19Speaker 05

  Sure. And then, then secondly, but alongside that, over time, we are seeing that investment go up because we want to get to a new energy system. And look, my perspective- It's really simple. When we were sat in twenty twenty one, when you and I were watching the crazy market that we had. When gas prices went up six times more than they should have done, we were exposed as a country. Eighty percent of our energy was from gas in one way or another. I believe you need to get to a system where you are just in a much more stable place, where we're not facing that kind of risk again. It's a bit like insuring your house. Making sure that if there is damage, it's not going to affect your life as badly.

• 23:51Martin Lewis?

  Understood.

• 23:52Speaker 04

  You've got this this news out today on writing off people's energy debt. How's that gonna work, Jonathan?

• 24:00Speaker 05

  Well, you know, I should start Adrian by saying, one of the one of the things I've done over the last few years is talk to many, many customers. And I have seen customers in real distress over the energy debts that they built up. You know, I've been to food banks, I've sat talking on the phone to customers, you've seen people in really tough circumstances. So what we're doing here is we're saying we're setting aside up to five hundred million pounds. That money is going to go to a fund that helps people find a way out of their debt that was built up during that really stressful period of the gas crisis. Three simple things need to happen. So you need to be over a hundred pounds in debt from that period. You need to be on benefits, so you need to be a low income customer. And then alongside that, we are encouraging you, we really need you to engage with your energy company.

• 24:45Speaker 05

  So you can get yourself onto a more affordable plan and get yourself back onto an even keel. What we're saying is, if you do that. Then we will provide some funding to support you to be able to make that change.

• 24:53Martin Lewis?

  So I know during the energy crisis, because we basically had an inactive government at the time because of elections for new party leaders of the Tory party at the time.

• 25:02Speaker 05

  Yes.

• 25:02Martin Lewis?

  I set up with the big energy companies and some of the the major charities an energy forum. And I remember at the time when they were talking about debt, their philosophy was, look, we can cope with past debts as long as people are paying their bills now. We can, we can write, that's basically what you're doing, isn't it? You're you're basically saying, look, we're just gonna have to, the past debts have gone, but we need to get people paying each month. Is that the philosophy?

• 25:23Speaker 05

  That's exactly right. And look, all my experience is, is that if if a customer is in debt. The best thing they can do is to find a way to engage with a company to solve the problem. Now, once you're on that path. Companies actually have changed, they have improved and they will work with you. To make sure you get on a more affordable repayment plan and our rules tell them they should do that. Coming back to rules.

• 25:42Martin Lewis?

  Yeah.

• 25:42Speaker 05

  But equally alongside that, if you feel you can't, I know many people feel they don't want to call their energy company. Then go to some of the amazing consumer groups out there and they will help you.

• 25:50Martin Lewis?

  Systems Advice, National Energy Action, but I will reiterate, first call, call your energy company.

• 25:55Speaker 05

  Exactly.

• 25:55Martin Lewis?

  And I mean, and especially if you're on, if you're vulnerable, get yourself on the priority services register. That means they have to treat you with extra kid gloves and they can't cut you off. But let's just play the other side of that. Ed asks. Why do other customers have to pay for other people's debts? This isn't going to their debt, it's paying private company shareholders dividends. It's that simple. This is bizarre. I don't have to pay for the guy in front of me when they can't afford their shop at the supermarket. How is this legal?

• 26:23Speaker 05

  Well, the reason that we allow companies to recover what's called bad debt. Is it debt that they know they can never, they can never get back is because that is one of the costs you have in any business, actually. And even in a supermarket, when, when people take stuff away, you pay, you pay for all the costs that are involved. What we are saying here is actually, if we invest this 500 million, we think the company is going to get more back. We think that bad debt goes down. So ultimately, we hope that this is cost neutral at least.

• 26:47Martin Lewis?

  So look, the subtlety for those listening going, I don't get this. What's the difference? The difference is when you go to Tesco, Tesco decides the price of its goods. When you go to an energy retailer, Jonathan decides the maximum amount on their standard tariff, which two thirds of people are on, that they can charge. On their other tariffs, they can charge what they like. So what you're effectively saying is you're having to proxy factor in business costs, normal costs of business into your pricing. Now, whether you do that right or wrong is for, is for people to decide, but that, that's your argument here is we have to look at it because they got to run a business. And our job is to allow them to run a functional business because we don't want to go bust. Is that fair?

• 27:23Speaker 05

  It's exactly right. And look, you know, none of us want to see bad debt. None of us want to see bad debt for the distress it causes or for the cost it causes for other customers. This scheme for us is a pathway for both sides to get out of it.

• 27:34Speaker 04

  Rob says, well, he wants to know why you're looking after the shareholders of the energy companies and not looking after the consumer. Peter says with UK energy costs, the highest in the world. It's quite clear that the regulator, inverted commas, isn't, inverted commas, regulating for the consumer, but for the government.

• 27:57Speaker 05

  So look.

• 27:58Speaker 04

  Okay, you want, you want, just actually, there's another question which kind of is probably worth trying to answer. Wouldn't we be better off if the regulator didn't exist, which is harsh if you are the regulator, but maybe you'd like to address that, you know, hypothetically, if you weren't there, what would happen?

• 28:13Speaker 05

  Having, having worked through this in this job for the last five years and seen the amount of distress that, that, that the cost of energy have caused, I know that people are angry and understand why, right? I have gone up and down the country, seeing the impact of the gas crisis and seeing what it's done to people. So of course they are angry. But look, let's take that question of what would happen if you didn't have a regulator. We used to have this in, in this country. We used to have no price cap. So in 2015, 16, you would have companies adding on not two pound fifty, but about eight or nine pounds to your bill out of that hundred to make sure that they, they were getting more than they needed and that was going back to their shareholders. So something off gem does, I know we do it every three months and I know it goes up and down, but it has taken away

• 28:53Speaker 05

  a whole pile of extra charges. Let me give you another example. You know, we saw three years ago, satisfaction in the energy industry was at sixty six percent, the lowest it's ever been. We worked hard through all of those compliance processes. And by the way, Martin, having a serious grown up conversation with the industry, to their credit, actually, that's gone up to eighty two percent. So we are working every day to make things better, but what we can't control, and that's really important that people understand this is we can't control that gas price out there or the electricity prices for generation. And that's why I know people feel frustrated, but our powers are limited.

• 29:28Martin Lewis?

  When I was filtering through the questions with the producers, the biggest single question we had, I'm paraphrasing, was why the hell do we pay more than anybody else in Europe? Why do we pay? Well, not actually, there are a few other countries in Europe on domestic bills, on, on, on commercial bills we are the half in Europe. Why are we paying more than other countries?

• 29:47Speaker 05

  So the, the biggest reason why we are paying more than other countries for domestic users is the fact that we are that dependent on the gas, gas price. So as I said to you, if you look.

• 29:56Martin Lewis?

  Only forty percent of our energy is generated from gas.

• 29:59Speaker 05

  But that goes up and down quite dramatically.

• 30:00Martin Lewis?

  Yeah, but we, we, you know, we've got all this investment in renewables. We've got all this renewable energy we keep being told about, more than other countries. Being brought on and yet we're charging people based, I've got loads of questions on this, but I'm going to paraphrase, let's do it now. Why are we charging people basically on Dutch gas prices? Why is the price cap set on Dutch gas prices when 60% of our energy isn't? And it's presented, it's charged on the highest rate at any one moment. Surely it's time to break that. Surely it's time to actually charge energy based on what we're paying for energy and stop paying people to blow wind farm energy out of the water and not use it. It's broken, is it? Is that you or is that the government?

• 30:37Speaker 05

  So part of that is around how the market is structured, but just come back to that £40. As I say, if you look at the system as a whole, most of our electricity and gas, and I think the 10 of the questions is right, right now, that is based on the gas price. Now, the more renewables we build, the more we break that link. The more actually you are paying for the cost of a solar farm, you are paying for the cost of a wind farm, you are paying for the cost of offshore wind. So that is really important. That is our mission is to go to a system that no longer relies on the international price. But the truth is, Dutch gas price, the British gas price, they are all driven by big external factors and they are very similar. So my job is to try and do what I can with the system today, but to put the investment in to change the system for tomorrow. And look, this is the important thing is it's going to take time.

• 31:21Speaker 05

  You know, we need new networks, we need new generation. We're making that investment alongside trying to manage the impact of this international market.

• 31:29Martin Lewis?

  In February, I had on the pod and on the show with Adrian here, Nick Butler, former head of strategy for BP, now a visiting professor at the Policy Institute at King's College. Nick argued that most of our supply comes from sources that don't have the sort of volatility that European gas prices always have. And this is an argument for you for Ofgem to rebalance the basket that you use and give more certainty to consumers. We are not getting the gain from our renewables, we're not getting the gain. That's his push on this. He knows more about that side than I am. Consumer price is not generation.

• 32:00Speaker 05

  Well, let's break it down. There are a number of fixed price contracts for renewables. Those are passed straight through through the price cap. So basically.

• 32:08Martin Lewis?

  Why are they fixed prices? Is that the government? Is that you? Is that how they negotiate?

• 32:11Speaker 05

  So that's primarily the government. They issue something called a contract for difference. So it's complicated, but the net cost is pretty much the same. So when in the gas crisis, those projects were actually paying back to customers because the market price was higher than the price that they charge.

• 32:26Speaker 05

  The rest of it, though, is still driven by the open market and that still is driven by that gas price. And look, here's the test.

• 32:31Martin Lewis?

  But your hot, my price cap, your price cap is set on the gas price, but it's only 40% of the bill. Why isn't it a spread of the different costs of energy?

• 32:38Speaker 05

  So let me explain the way we calculate the price cap. So we take that breakdown, 40, 25 and 12 and 12, et cetera. We only reflect costs in each category. So we don't say the whole price cap is multiplied by the price of the gas price. We take that £40, we look at the element that's driven by gas, we take it from market prices, we pass it through every single day as that price changes. Now, look, here's my test. My test is if we were paying too much, if we were charging too much compared to what the companies are paying for, then that profit that we allow for around £2.50, the actual profit of companies would be higher. Right now, we're seeing that profit is even lower than that £2.50. So my test is always to say, if things are being overpaid for, are we seeing the profits reflected in the industry? And I don't think we are yet.

• 33:23Martin Lewis?

  I'm going to go straight into another question, Adrian, if that's okay. Barbara Guppy says, when Ofgem orders suppliers to pay a customer compensation, that money should come from directors' bonuses, not the cost of business. As a cost of business, every customer is funding compensation. As a charge on directors' bonuses, there'd be an incentive for change, improvement of business practices that cause the complaint. Same true of fines, I suppose. Are they real, are they proper deterrents if it's just, you know, coming out of increasing customer costs?

• 33:51Speaker 05

  Well, imagine where that money comes from. So if you've got a price cap market, the price is fixed, they can't put their prices up to pay that fine. The only place it comes from actually is ultimately the profits of the company or, you know, up to the shareholders to work with the management as to how that's divided between salaries and profits. So it does hurt companies and they do pay attention. And also, you know, the voice we have, the way we talk about the sector is really powerful. So it's not just about the money, it's also about saying, look, which company has gone wrong? We talked about O2 earlier. I'm sure all this publicity is not something that O2 welcome.

• 34:24Martin Lewis?

  No, and I'll let my, I'll continue doing it on the back. Adrian.

• 34:28Speaker 04

  Joanna, why won't you reduce the standing charge so that people simply pay more for the more energy that they use?

• 34:34Martin Lewis?

  Jonathan's just giving me a look because he knows I'm coming in with a lot of follow-ups on the back of this, but go with this one first.

• 34:39Speaker 05

  Well, Adrian, just to stay upfront.

• 34:41Martin Lewis?

  I've been waiting for this one.

• 34:42Speaker 05

  We know the strength of feeling out there on standing charges. I mean, I remember when we issued a consultation, we're a regulator. I think Martin, it's fair to say our consultations in general are fairly boring. We had somewhere like thirty to forty thousand people reply.

• 34:54Martin Lewis?

  Biggest ever.

• 34:55Speaker 05

  Biggest ever that we've had. Now.

• 34:57Martin Lewis?

  I may have been responsible for a bit of that.

• 35:00Speaker 05

  Now, let's just start with the basics. As you know, as we talked about, that standing charge is to pay for your networks and to pay for the.

• 35:06Martin Lewis?

  I'm just gonna, I'm just gonna, for those who don't know, the standing charge is the daily amount that you pay to have the facility of gas and electricity. And then there's a unit rate that you pay for each unit or kilowatt hour of gas and electricity you use, just a, just a glossary.

• 35:20Speaker 05

  Now, we can't get rid of that cost. So if it doesn't stay on that fixed unit on the standing charge, then it has to go to the unit rate, which goes up and down with, with what you, what you use. Now, the problem we found by just cutting it, saying, okay, we're going to have a lower standing charge and a higher unit rate, is we saw there are some families who have very, very low incomes, who live in drafty homes, or for example, have electric heating, or have disabled children that would have been made a lot worse off. So the only way to be able to do that is if we found there was some kind of targeted support alongside it, that makes sure those families, that kind of, that loss was somehow offset. Now, we haven't got to that yet.

• 35:56Martin Lewis?

  So just, I was involved in this debate.

• 35:59Speaker 05

  Yes.

• 35:59Martin Lewis?

  And I, I agree on that particular point. The way we wanted to bring the standing charge down was that, that needed government to put that targeted support in, not you. And this was a failure of being joined up between government and regulator. And, and I know that you wanted it to happen. So I'm not going to beat you over the head with a stick on that one.

• 36:15Speaker 05

  So as you know, Martin, we then looked at saying, well, let's divide up the price cap. Let's have a low standing charge price cap and a high standing charge price.

• 36:21Martin Lewis?

  Which was my suggestion.

• 36:22Speaker 05

  Yes, which is what you put, put to us. Now, we, we looked hard at that. In fact, that was our preferred option, I believe, at one point. The reason why we didn't do it there, and I know you're going to ask us questions about this, but the reason why we didn't do it there was with two things, Brittany. First of all, you know, when we look at the evidence of what customers want, it's not always what you'd expect. Some people actually said to us, do you know what? Even if I have to pay more, I'd like to have a lower standing charge. So there's a lot of kind of complexity in what, what tariff people want. And secondly, just the way in which the, the complexity of administering the price cap becomes, we felt that was too hard. So what we've said is we want customers to have that. Choice, our current consultation, and we're still consulting, says every company should be providing you with a lower standing charge option.

• 37:06Speaker 05

  Now, that's still out for consultation, but our idea is for all those 40,000 people that took the time to write to Ofgem, you should be able to look into the fixed term market, you should be able to find a tariff that gives you a lower standing charge.

• 37:20Martin Lewis?

  Now, the reason I was quite scathing of your proposal to do this by a voluntary, by a compulsory option outside the price cap mechanism is twofold. So let's deal with each of my two objections. My first objection is the price cap mechanism is price capped. What could happen here is a company could launch a lower standing charge option, and the costs it takes from the standing charge could be put on the unit rate, but it could then also increase the unit rate by even more than that, and be more expensive than the price cap, because the price cap is a regulated price, and these no standing charge options aren't. So effectively, what I could do if I were a scurrilous energy firm, is I could order a low standing charge option, but with outrageous unit rates,

• 38:04Martin Lewis?

  which effectively means no one is going to sign up for it, because you shouldn't be getting it, and you don't have policing on that.

• 38:10Speaker 05

  Well, so we are absolutely on to that problem. So within those regulations that we're proposing, we're saying that that transfer has to be reasonable, and we are going to be monitoring that really closely. And a bit like you described in the O2 situation, we will have the data to say, are the costs being transferred fairly here? So we think we have the test to address that problem.

• 38:29Martin Lewis?

  Okay, number two.

• 38:32Martin Lewis?

  The main reason for me suggesting this, and that it was in the price cap mechanism, is some of those who are the greatest victims of the disproportionately high, in my view, standing charge, are older and vulnerable customers who do not switch, someone with onset dementia as an example.

• 38:51Martin Lewis?

  By making this a choice mechanism, they will not gain the benefit of a low standing charge as a low user. They will face the moral hazard that if they cut their bills, they don't get the gain from it. You've got many older people who don't use their gas in winter but are paying a high standing charge for it. My proposal was that you have two price cap options and then for vulnerable people, we can get into what the definition of that is later, but let's say Priority Service Register as an example, you would default to automatically switching them to whichever one is cheaper within the price cap mechanism, based on their prior years' usage with an opt-out mechanism. That would protect the most vulnerable people in society. That is my biggest frustration with the scheme

• 39:34Martin Lewis?

  that you've got. Many of the people who need this most won't access it because they're the people who don't switch.

• 39:39Speaker 05

  Look, we are really concerned about that group. As I said, when we looked at it, actually people's preferences don't necessarily align with what a company might do in that sector.

• 39:48Martin Lewis?

  But these people won't have replied to your survey. These are the people who won't be engaged. That's why people like me and others are trying to voice for them.

• 39:54Speaker 05

  Sure, and you know, and the complexity of doing that became too much. But the story isn't over alongside this.

• 39:59Martin Lewis?

  Why was it too complex? I mean, I could do it on a calculator now for anybody. I don't believe an energy firm couldn't.

• 40:04Speaker 05

  Well, it's the number of different tariffs you have and the ability to...

• 40:07Martin Lewis?

  But within the price cap, there are only two tariffs.

• 40:08Speaker 05

  Well, there are...

• 40:09Martin Lewis?

  If you'd done it within the price cap.

• 40:10Speaker 05

  There are two tariffs, but there are also two tariffs by payment type. There are two tariffs by payment type by area.

• 40:15Martin Lewis?

  But people don't change payment type frequently. I'm sorry, I don't believe that's a valid excuse.

• 40:20Speaker 05

  I still think that for that group, the most important thing is something more systematic and more strategic, which comes back to that first option we explored. Now, we haven't...

• 40:29Martin Lewis?

  What, like a social tariff?

• 40:30Speaker 05

  So alongside a social tariff.

• 40:32Martin Lewis?

  Which isn't being introduced by anybody, unfortunately, even though all governments have looked at it, and that's not you, but...

• 40:36Speaker 05

  So, as we say, this offer of a choice is the first step in what we're doing. The other thing we're doing, Martin, which you might have seen over summer, which, you know, there was a big debate out when we announced it, was we are saying, actually, we need a more fundamental look at all the costs in the system. So going back to where we started, that breakdown of the bill, as I've said, the investment in low carbon is going up, the investment in networks is going up, we hope wholesale is going down. So those fixed costs are rising. So we have launched something, I'm afraid in regulator speak called the cost allocation review, not the most glamorous title. But that's exactly going to answer the question that says, how do we sort this once and for all? And we are working closely with government, Martin, and we do hope we get to a more systematic solution.

• 41:16Martin Lewis?

  But that's three or four years away, whereas the standing charge thing is meant to be coming in in January.

• 41:19Speaker 05

  Exactly. So this is the first step. Okay.

• 41:23Speaker 04

  So Margaret wants to know, should she be worried about OVO? Is it going under?

• 41:29Speaker 05

  So I know there's lots of speculation in the press. And all I'd say is we don't comment on any company and exactly where they are. But we work across the sector to make sure that companies are well capitalized. Now, I can't guarantee any company isn't going to go under. Because, you know, these are private companies and of course they have financials that change over time. But we are in a much better place as a sector than we were in 2021. And the truth is, even if the worst happened with one of the big companies. We've been through this with bulb as a customer, your system runs, you still get your energy. And we showed when that, when bulb failed in 21, the end of 21, 22. We were able to look after customers and get them to a new supplier.

• 42:07Martin Lewis?

  And the data systems are better now for protecting the credit when a firm goes bust because you've improved that. The main risk, I'll be blunt, if any firm, I'm not saying any will, but if any firm were to go bust. Your main risk, you'll get continuous supply and your credit will be protected. Your main risk is that if you've chosen that firm to get a cheap deal. You could lose that cheap deal when you're ported to a new firm if that firm went bust. And if prices had gone up in the interim, you would have missed out on the opportunity to keep a cheap deal from another firm. You could switch again, but they may not be as cheap. That's the primary risk of a firm going bust.

• 42:37Speaker 05

  That's true. That's true for the very small companies, but the big companies, we just keep them going. We just keep them going and then we transfer them whole almost all to someone else.

• 42:44Martin Lewis?

  I'm going to move on from Ash had a question next, which is why can't we switch to an energy pricing system not tied directly to wholesale gas? I think we've covered that, Ash. I hope I covered your question earlier on that one. Adrian, do you want to, have you got next?

• 42:55Speaker 04

  Yeah, Kev wants to know, why call it a price cap? Sounds like we're getting value when we are continually getting ripped off. And Molly wants to know, why can't you just cap bills lower? The big energy firms aren't struggling.

• 43:07Speaker 05

  So, I mean, on the second question, it all comes down to that £2.50 out of £100 that we started with. So we have to allow them to make some profit. They're making less than that £2.50 right now. But the frustration for me, and I know for the frustration for everyone out there, is we don't control the cost elements that go into it. So when you went through that, sort of went through the gas crisis, when gas prices were really high, it was the people getting the gas out of the ground. They would be paying £0.20 a unit and making £6 a unit at some point. And that's, that's the thing that Ofgem, even the British government, don't really control that market. And that's why we think building this infrastructure, taking the system to a different place, means we have a much more stable system and we get away from this constant up and down of the gas, of the gas price.

• 43:49Martin Lewis?

  Just on the price cap, Bill Wells asks, when are we going to get rid of the crisis measures from the pandemic? And he's particularly talking about the three monthly energy price cap revisions. You know, I don't think you should have moved from changing the price cap every six months to every three months. What, isn't it about time you put it back and gave us some, a little bit of stability that's moving in there? You did it to help protect companies from volatility. That volatility has gone to an extent, the extreme volatility. Isn't it time to go back to a six monthly system?

• 44:16Speaker 05

  So we are looking about how the price cap operates and we're continually thinking about how we might review it. And we are coming forward with possible changes. But funny thing is, I, I asked that question quite recently in, in Ofgem. And we looked at what customers were telling us. And again, there's quite a mixed view. Some people prefer to have more regularly updated prices and some people prefer to have stability.

• 44:36Martin Lewis?

  I mean, the one, the only counter is the one advantage of it is we haven't got enough people on, on fixes and special deals. Too many are on the price cap now. You would like to set that.

• 44:44Speaker 05

  I agree.

• 44:44Martin Lewis?

  It, it should be a third, not, not two thirds. And the, the theatre of the price cap change actually does encourage people to switch. That, that's the, the only slight positive of it.

• 44:56Speaker 05

  We should talk a bit about how the opportunities in this market are going to change as well. So, you know, we talked a lot about fixed deals and the price cap. What we're beginning to see, though, is particularly for for anyone who has new technology like solar panels, like batteries, is a whole set of things out there that will make bring your bill down. So one thing I want to work on in the next few years is how we bring those time-based tariffs to life so that everyone could benefit from them. And to be clear, not just the wealthy households with the Teslas, but actually, how do we get this equipment into vulnerable households that actually helps them get cheaper energy because they're borrowing it cheaper from them?

• 45:30Martin Lewis?

  And as you know, I've spoken to you in the past, my great concern is because these are not trans time of use tariffs change every half hour, that we have to force companies to publish an algorithm so that people can actually compare them properly. I mean, individuals won't be able to do it, but, you know, organisations will be able to do so because it's all very well saying we've got a 30-minute tariff, it's got no price listed. And therefore, we have to be very careful that time of use tariffs, great advantage for the economy, it doesn't become negative for the consumer on that. But I I want to go, I've got a very interesting question for you next, and we haven't got long. This is from Claire Cortino, right, who you're laughing because you will know is the shadow Secretary of State for Energy and is the former Secretary of State for Energy. And now I'm interested in her question.

• 46:13Martin Lewis?

  This is literally on a reply from me saying got questions for off gem and about, and she's come back on it. Now, I've got to ask you her question, but I also want to know, how much do you have to listen to your political paymasters when they are both in power and out of power? Which is why I'm fascinated, you know, she's got a question here. She could have probably asked you when she was Secretary of State for Energy. Anyway, Claire says, I've got one. Would axing the carbon tax on electricity generation lower the cost we pay for gas, wind, solar and nuclear? And would that benefit consumers? Clearly, it's a politicised point. She's a shadow minister. So her question first, then my question on it after.

• 46:46Speaker 05

  Fine. I mean, first of all, I should say to Claire, she knows this. Regulators talking about tax policy is a bit like sort of swearing in church. We don't really get involved in what the Treasury does. But in technical terms, it might bring down prices. But then you've got to think about all the things you're selling to Europe and how you're going to respond to those. So that really is a matter for politicians to debate rather than one that I get into.

• 47:08Martin Lewis?

  Who pays for offgem? And how much interaction and input does the Secretary of State for Energy have on what you do?

• 47:15Speaker 05

  So we're divided into two, really. So we have the bit that we've talked about today, the regulator. That's paid for by customers direct from their bills. We have to get Treasury to approve it, but it's a

• 47:26Martin Lewis?

  How much am I £100?

• 47:27Speaker 05

  So we think, out of £100, it's less than 25 pence, I think, roughly, roughly, roughly. But we also have another part that delivers all those government schemes. So that makes sure that you get those wind farms paid properly so they can be built and everything else. That's paid for principally by the government directly out of taxpayers' money. Now, look, we have to be honest, in this world, energy strategy is really set by government policy. They, they're the ones that design the schemes that get the wind farms built. They're the ones that set direction, which Ed Miliband has done, getting us towards 2030. But we are independent. We have to make independent choices and independent judgments about what we need. So for example, at the end of this year, we are going to end a massive negotiation with those network companies

• 48:10Speaker 05

  as to how much money they need to build the network we need for the future. We do that independently and the Secretary of State is not allowed to input into that.

• 48:16Martin Lewis?

  This may well be our last question, depending on time. And I apologize to the questioner, I have lost their name. But it's a simple one, and I think it, when will renewables start lowering our bills? Because they've added to our bills, when will we start to see the dividends?

• 48:31Speaker 05

  So I think what you're going to see over time is that wholesale element, that £40 go down, the investment in renewables go up slightly. And then, once those two things even out, we think it's going to take some time, based on costs today, then bills will start to come down. Now, the system costs, when we look to the analysis and said

• 48:47Martin Lewis?

  Just a reminder for those people, we're talking £40 per hundred, not an actual £40, it's £40 per hundred, so 40%.

• 48:53Speaker 05

  Exactly. So, so when my colleagues in something called the System Operator did the big plan, they said roughly, roughly, these two things balance each other out over the next five years. And then we begin to see, so as you get into the 2030s, costs come down. And that doesn't mean that prices can't come down, because of course, government has many policies that might bring down our prices and bring down our bills. And really, that's a matter for them.

• 49:15Martin Lewis?

  Okay, but it's quite a long time away, isn't it? I mean, we're basically as a country, we are. The idea is, or the concept, whether it works or not, I'm just not going to get involved in that. It's not worth my while, is we are investing now to bring down prices in the future. But I know you'll hate this question. One of the Labour government promised energy prices down by £300 during the life of the Parliament. Energy bills down. Do you think there's any realistic chance of that happening without massive governmental intervention?

• 49:44Speaker 05

  So I think you've got to do both. I think the government policy will need to bring down prices and will need to regulate to make sure that we manage costs as best we can. Now, I haven't got a.

• 49:53Martin Lewis?

  What should the government do to bring down prices? What could it do? I won't say should, you can't say that.

• 49:57Speaker 05

  So I couldn't.

• 49:57Martin Lewis?

  What tools are within its option range?

• 50:01Speaker 05

  Well, I mean, we all read the papers. We know that there is speculation that the Chancellor is thinking about tax changes. So that's the VAT we talked about.

• 50:09Martin Lewis?

  Although I would simply take that and to cut it off the standing charge. Then it's a flat one for everybody and not just high users who gain more, but go on.

• 50:14Speaker 05

  I've been copied on that letter, so I think I've seen that. The other thing is you could look at some of these legacy renewable levies, for example. So there are things that government can do. But ultimately, when you look at system costs, the investment will make it more stable and will allow them to apply policy to bring costs down.

• 50:30Martin Lewis?

  Thank you so much, Jonathan Brearley, boss of Ofgem.

• 50:35Martin Lewis?

  Okay, so Jonathan Brearley has left the studio. I'm sitting here mulling what was said afterwards. Probably the most interesting thing, and it's just a small point in there, I thought was on the where he explained about how much profit energy firms can have. I always knew it was a £2.50, but what was a really interesting rationalisation for me was that they must have the pricing right because the actual profit that energy firms make is less than the £2.50 per £100 that they are allowed to do, which, I mean, does make logical sense. Now, what's really interesting about this, though, is one of the great difficulties when you're a regulator is they only regulate the retail side.

• 51:16Martin Lewis?

  But when people see profit announcements from big companies, you know, like Centrica. Centrica is a vertically integrated firm. In other words, some of its money comes from British Gas, who sells us gas, but it also has Generation and other arms, and it's profits which are reported about all the different arms. So the bit that Ofgem regulates and the bit that Ofgem doesn't regulate. And what we've found is a lot of these vertically integrated firms that go right down from Generation to retail energy, they've made very big profits. And they're reported as very big profits, but not necessarily from the retail arm. And we don't have a regulator regulating the non-retail arm. I mean, arguably, government could do it, but it's an international market, so it's tough to do.

• 51:58Martin Lewis?

  So it is quite a complicated web here, working out who's making what money and are people really being ripped off? The instinct says yes, and yet some of the facts behind it say, well, not quite as much. I mean, the ripoff is coming further away than from the direct company that you pay, which is a tough circle to square. I was also fascinated by some of the green stuff that came in there. That is going to be the debate over the next five years. Things are swift, are swinging. There's a huge militancy from people who are pro-green, and there's a militancy from people who are anti-green measures or anti-renewable and climate change type of measures goes on out there. I mean, I always remember the most interesting thing for me on that, while I'm mulling on

• 52:42Martin Lewis?

  this. I used to have a tool on my website called Pick Me a Tariff. And the key to Pick Me a Tariff was you had a number of balls, think of them as balls, like, I think it was 21 balls that I designed it, and you had five different categories that you could put them in. There was price, there was service, there was green, there was price certainty and big name, that type of stuff. Now, what would happen in green is a few people would put a lot of their balls. So the more balls you put in there, the more when we chose a tariff for you, we weighted how many, you know, how important that subject was in terms of your criteria. And then we could, you know, say, well, this is the one that Fits what you want. Quite a few people put a lot of balls in green, but most people hardly

• 53:25Martin Lewis?

  put any in. In fact, if I remember the stat right, I think 60% of people didn't allocate anything to green, even though at the time when you were doing polls, it was something like 70 or 80% of people in polls said green issues are really important. But when it came to a practical choice that no one saw, and we never saw in individuals, I was looking at agglomerated data, a practical choice on something that would really affect them in their homes. What was always fascinating to me is, in a way, people weren't willing to put their money where their mouth was. They weren't putting balls in the green pot. I think the average was something around one ball out of 21 went in the green pot. So I think there is an interesting debate to be had on that friction going forward between building our renewable and green strength as a country and the increased immediate

• 54:10Martin Lewis?

  costs that that will mean that Jonathan was accepting himself. Anyway, that's just me mulling. In a moment, I'm going to give you a quick summary of what you should be doing to cut the amount that you pay for energy. But I think podcast producer Matt with me and someone had a question about O2 that came in during the show, didn't they?

• 54:27Speaker 06

  Yes, he texted in, it's from Phil Bridgend. It's hard to say, Phil Bridgend.

• 54:32Martin Lewis?

  Phil Bridgend.

• 54:33Speaker 06

  Phil Bridgend. See, you messed it up as well. Sorry, I will read the text now.

• 54:36Martin Lewis?

  It could have been Phil Manose. I changed that from the Simpsons version. There we go. Carry on.

• 54:41Speaker 06

  Okay. Morning, all. Regarding O2 price rises and the 30-day penalty-free period, you actually can't leave penalty-free if you wish to transfer your number over if you still have your device contract in place. If you wish to take your number with you, they ask you to pay off your device plan immediately. You can only leave penalty-free by not asking for a PAT code. Is this right?

• 55:02Martin Lewis?

  No, I don't believe it is. In fact, interestingly, in the letter I've written to the Chancellor about O2, one of my notes is about this as a perceived rather than a real problem. Now, I think the actual answer, and I need to be straight, I've been digging into this and I haven't got a full answer. It seems to me that if you got your contract direct from O2, then you can leave your airtime plan penalty-free. So the airtime plan is what the price has gone up by, the amount that you pay for the minutes and texts and data that you use. But you can keep your handset plan separately and continue to pay that monthly. But I'm checking whether that also applies to people who bought their handset via resellers

• 55:45Martin Lewis?

  on an O2 contract, and I'm not sure about that yet. So generally, as far as I believe right now, let's call it a 90% certainty, you should be able to leave O2 for your airtime plan, but continue to pay off your handset as it is a separate loan agreement on a monthly basis with O2. And if you can't, that's something that we'll be raising as well. But I think you can, but forgive me for only being 90% on it at the moment. Now, on to some of those practical saving tips. What tariff should you be on right now? What I actually wanted to do in this bit on the back is to talk to you about what you should be doing with your energy bills right now. And that all starts with the price cap. Just to go back

• 56:27Martin Lewis?

  to what the price cap is. The price cap is the default tariff that you pay if you haven't switched. So if you've never switched, or you've come off a fix or a special deal and not done anything, you are on a priced capped standard tariff regulator set, and I call it the pants cap. Now, the price cap, as you've heard, moves every three months. It went up 2% in October. The current prediction is it'll come down around 1% in January, so not very much. And then, it's much further away. The January prediction is pretty solid because the assessment period for that ends in, well, not long, in just two and a half weeks. It's a three-month assessment period. It's 19th of August to 17th of November. It

• 57:09Martin Lewis?

  ends on the 17th of November, so that price is likely to be pretty set. It's going to be down around 1%. The April one is much more crystal ball gazing, but up 6% in April is the current prediction because of increased network costs is what I'm hearing, and then down 1% in July. So the price is pretty set for the next year to be, on average, probably slightly more than it is right now. And then you contrast that to what the very cheapest tariffs on the market are. And they are fixes. And you can lock in right now at up to 13% less than the current price cap, giving you absolute surety that you know what you are going to pay.

• 57:51Martin Lewis?

  Now, if you're looking for a simple solution, you can either stick on the price cap that we think is going to stay where it is, maybe go down a smidgen then up a bit more than the smidgen then down again, or you can lock in at 13% less than that rate for a year. And most of the cheapest fixes, by the way, and do go onto a comparison site, preferably one that's whole of market, because your cheapest depends on where you live and what you use, which is why I'm not listing specific tariffs. But most, I've got a list of top six in front of me, most do not require you to have a smart meter. Not all of them require you to be on direct debit. There is choice out there, but if you are on a non-smart prepayment meter, there isn't much choice of fixing. And all of them have early exit penalties, though Octopus has one, it's not that cheap, that doesn't have early exit penalties. So if something were to change, you would be able to get out of that one, although

• 58:36Martin Lewis?

  I would probably, if I'm fixing, be hedging to just getting the cheapest at the moment based on the current predictions. There are other alternative tariffs out there. We talked with the regulator about time of use tariffs. If you're a sophisticated user or an EV user, you have an electric vehicle, it's absolutely worth looking at specific electric vehicle tariffs, especially if you drive a lot and that is a big proportion of your house bill, that give you much cheaper rates overnight. Or then there's things like the Octopus Agile and Tracker tariffs. The Tracker tariff changes every day, it can be very cheap. The Agile tariff, electricity only changes every 30 minutes. For some sophisticated users, it is extremely cheap and sometimes you're paid to generate electricity overnight. So there are a lot of options out there. Simple, go and get yourself the cheapest fix.

• 59:20Martin Lewis?

  If you've got an electric vehicle, look at an electric vehicle tariff. If you're a sophisticated user who knows how to manage your energy stuff, you probably know what you're doing anyway, so you don't need me to tell you, I would be looking at the time of use tariffs like the Octopus Tracker or Agile. It's just a little summary on the back of the podcast, so you can go and take some practical action. But savings at the moment, you know, clearly of 200, 250 quid a year on average are easily possible for most people by fixing based on the predictions. So if you're sitting on a price cap, go on to a whole of market comparison site, sort yourself out.

• 59:54Martin Lewis?

  And that is it for this week. If you've enjoyed it or found it interesting, please do tell your friends you've been listening to the Martin Lewis podcast. And why not subscribe? Then your pockets will be pleased with you. We tend to put out a new episode every Thursday and now on Mondays too, in the form of our new Question Time podcast, where you can ask me absolutely anything and everything. If you've got a question, just email [email protected]. And if you haven't enjoyed it, well then, why have you been listening for this long? You can't blame anyone else for that, you know. Sometimes you just have to go and have a damn hard look in a mirror.

• 1:00:43Speaker 07

  Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing [email protected]. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

• 1:01:18Speaker 04

  Sometimes we all need an extra helping hand, especially with a tricky business problem you've been putting off. Claude is the AI for just that. It's the collaborator that understands your entire workflow and thinks with you, not for you. And Claude isn't just for quick questions. Hand it a whole task, like turning a folder of scattered notes into a report, and it does the work and hands back something finished that you can open and edit. Claude can now draft a doc or deck right in front of you, and Claude Design now lives right inside Claude. Describe the website or prototype you're picturing, attach your design system, and it comes back in your own design language, ready to edit right on the canvas. It works with your files and the tools you already

• 1:02:01Speaker 04

  use, like Gmail and Slack. And whether you're debugging code at midnight, building a financial model, or strategising your next business move, Claude extends your thinking to tackle the problems that matter. For problems worth solving, get started with Claude at claude.ai/solve. That's claude.ai/solve. And check out Claude Pro.

• 1:02:23Speaker 04

  Which includes access to all of the features mentioned in today's episode. Claude.ai/solve. Hi, I'm Molly Graham, host of Work Life, a podcast from TED. The most important lessons about work usually aren't the ones anyone teaches you. They come from experience, from uncertainty, from figuring things out as you go. On this show, my expert guest and I explore how careers really unfold. Through change, through doubt, through the decisions that shape who we become over time. Because those moments aren't the exception, they are the work. Listen to Work Life wherever you get your podcasts.