Economy 7 tariffs, also known as off-peak tariffs, are a type of electricity tariff that offers lower rates for electricity used during off-peak hours. However, recent analysis from our database shows that the cost of electricity for Economy 7 customers has risen significantly in recent months.
But wasn’t the Energy Price Guarantee (EPG) made to protect against energy prices rising further?
Yes, it was however a loophole in the EPG means that Economy7 Tariffs were not explicitly protected by this. In fact, according to our findings, the cost of electricity for Economy 7 customers went up by 7.6% on average in January (£116), compared to an average increase of around 1% for single rate customers. This means that the increase in costs for Economy 7 customers was 46% greater than that of single rate customers, with an average increase of £464 per household based on values for electricity.
Between November 2022 and January 2023, annual costs for Economy 7 customers increased by up to £330, compared to an increase of £90 for single rate customers. This is a significant difference that will have a noticeable impact on household budgets.
Our analysis also found that the average increases in unit rates for Economy 7 tariffs were greater for day-time rates (5p) than for overnight rates (1p). This is particularly noteworthy because day-time rates are already more expensive for Economy 7 customers than for single rate customers. Currently it is assumed that the average Economy7 user, uses 42% of their electricity during the 7 off peak hours. This means that those who do consume energy more heavily during those non 7 hours of off-peak time would be hit hardest.
It's worth noting that 3.3 million households in England were on Economy 7 tariffs in 2021 - around 14% of households. Furthermore 2.1 million households use electricity for heating. This means that a significant portion of the population is affected by these rising costs.
The following histograms show the distribution of electric unit rate increases across E7 and single rate tariffs. E7 day rates saw large increases across the board whilst E7 night rates were on average neutral. Single rate tariffs unit rates saw very little change by comparison.
So what needs to be done to address the rising costs of Economy 7 tariffs?
One solution could be for regulators to impose stricter rules and regulations on these tariffs to ensure that they are fair and transparent for customers. This could include measures such as capping the rate of increase for these tariffs, or requiring energy companies to provide greater transparency about the costs associated with these tariffs.
Another solution could be to introduce greater transparency around the use of Economy 7 tariffs. Given the changing ways in which people use energy, with more households turning to electric vehicles and other forms of energy storage, it's important that customers have a clear understanding of how these tariffs work and how they can benefit from them. This could include providing more detailed information about the costs associated with different time periods and usage patterns, as well as information about how to optimize energy usage to take advantage of off-peak rates.
