Energy prices set to rise this winter, what can freelancers do to alleviate the costs?
UK energy prices are going up this winter. Here are some approaches to keeping bills lower especially for freelancers who work from home
Freelancers and contractors who work from home are bracing for another winter of high energy bills as the latest energy price cap – which sets a maximum rate per unit and standing charge that can be billed to customers for their energy use – will rise by 10% on the previous quarter from 1 October to 31 December 2024.
While this is an increase on the previous quarter, the new cap is 6% (£117) cheaper compared to the same period last year (£1,834) and 49% (£1,654) less than 2022 (£3,371) during the energy crisis, which saw the introduction of the Energy Price Guarantee.
For an average household paying by direct debit for dual fuel, this equates to £1,717 per year, adding around £12 a month to an average bill.
This means freelancers, who often work from home and rely heavily on electricity for their businesses, will need to factor these sustained high energy costs into their financial planning. It’s crucial to accurately calculate overheads and adjust rates accordingly to ensure profitability isn’t eroded by rising energy bills. However, if you work from home only the heating for work-related rooms can be expensed on your tax return as a percentage of your total bill.
For those who live in older properties with off-grid oil-based heating their monthly bills will likely be much higher so look for ways to keep your bills down as much as you can by purchasing in bulk with neighbours, purchasing in summer when demand is lower and watching out for lengthy contracts you could sign up for with certain domestic fuel suppliers without initially realising.
Figure 1: Cornwall Insight’s Default Tariff Cap forecast using new Typical Domestic Consumption Values (dual fuel, direct debit customer)
Figure 2: Default Tariff Cap forecast, Per Unit Costs and Standing Charge (dual fuel, direct debit customer)
Energy prices look set to rise every year
Jonathan Brearley, CEO of Ofgem, says, this rise in the price cap is going to be “extremely difficult for many households.”
Anyone who is struggling to pay their bill should make sure they have access to all the benefits they are entitled to, particularly pension credit, and contact their energy company for further help and support.
Brearley encourages people to shop around and consider fixing if there is a tariff that’s right for you. He says, “There are options available that could save you money, while also offering the security of a rate that won’t change for a fixed period.”
Ofgem is working with Government, suppliers, charities and consumer groups to do everything the can to support customers, including longer-term standing charge reform, and steps to tackle debt and affordability.
“Options such as changing how standing charges are paid and getting suppliers to offer more tariff choices and give customers more control are all on the table, but there are no silver bullets,” says Brearley.
The long-term solution, according to Cornwall Insight, lies in transitioning to renewable energy sources. However, in the meantime, freelancers will need to proactively manage their energy costs to weather this period of price volatility.
How to keep energy bills low during peak working hours
If you work from home and want to avoid heating unused rooms, a space heater can be a practical solution. Instead of running your central heating system all day, people opt to use a space heater to create a comfortable environment in their home office. Various options are available, including oil-filled, fan-forced, infrared, and ceramic heaters. For instance, a 1500-watt oil-filled model can heat a 300-square-foot space. If a space heater is used solely for office use, then it can be expensed in addition to any central heating you may use for that room.
For families with children, you could run the central heating in the morning and then switch to a space heater in the home office during work hours. Bedrooms can also benefit from space heaters with timers, providing warmth when needed without heating the entire house in the evening or overnight. This approach offers flexibility and can lead to significant energy savings, especially in homes with oil heating or rooms that are used infrequently.
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Be warned however that the suggested minimum temperature a home should be heated is 15 degrees Celsius as anything below that could lead to burst pipes in the event of a freeze. Most insurers will not pay out for a claim for burst pipes due to freezing if you have left a property unattended or below 15 degrees Celcius.
Which energy suppliers offer time-of-use tariffs?
Here are the UK electricity suppliers that currently offer time-of-use tariffs:
- Octopus
- 100Green
- British Gas
- OVO
- Ecotricity
- Good Energy
- E.ON
- EDF
- Scottish Power
Some of these suppliers provide off-peak electricity to all customers, while others only offer time-of-use rates to households with additional appliances such as a heat pump, electric car, storage heaters, or electric boiler, according to solar supplier Sunsave.
Sunsave says every domestic electricity supplier – including those not on the list above – offers an Economy 7 tariff, which gives you seven hours of off-peak electricity every day, but they’re mainly targeted at electrically heated homes.
Suppliers frequently change the off-peak tariffs they offer, so make sure to call a few companies before you commit.
Who is eligible for a time-of-use tariff?
Almost all households are eligible for a time-of-use tariff, as long as they’re connected to the electricity grid and have a smart meter.
Your smart meter will need to be able to communicate with its national network, but most homes are close enough to the network that it’s not an issue.
To sign up for an Economy 7 tariff, a smart meter or an Economy 7 meter will also do. Some suppliers also require you to pay by direct debit to qualify.
It’s a challenging time for everyone. However, with careful planning and proactive measures, freelancers can mitigate the impact of these high energy prices and ensure their home-based businesses remain sustainable.