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Huge energy firm with 6.8million customers to hike bills for tens of thousands in weeks – can you cut costs?
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A HUGE energy firm with 6.8million customers is hiking bills for tens of thousands in weeks.
Octopus Energy is overhauling its tracker tariff for the first time since its reintroduction last summer.
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But it means customers will have to pay more from Thursday, February 15.
The Octopus Tracker offers customers gas and electricity prices equivalent to wholesale costs plus a small additional rate.
This means the amount you pay can change daily, depending on what's happening in the energy market.
But it also means customers are paying substantially less than the 29million households on the standard variable tariff (SVT), which has its prices capped by Ofgem.
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For those who signed up to the Octopus Tracker before December 11, 2023, an average additional 7.36p per kWh is added to wholesale electricity costs.
And an average additional rate of 1.21p per kWh is added to wholesale gas costs.
However, starting February 15, all existing customers will see their prices rise when Octopus increases these additional rates for all.
The average additional rate added to wholesale electricity prices will rise by 2.40p per kWh to 9.77p per kWh.
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And the average additional rate added to wholesale gas prices will rise by 0.26p per kWh to 1.48p per kWh.
Customers who signed up to the Octopus Tracker after December 11, 2023, already pay the new additional rates listed above.
However, the supplier says that even though they've upped this additional charge, the tariff has remained good value, and its average rates have remained around 40% cheaper than the SVT between December and January.
Currently, 29million customers on the SVT pay roughly 28.62p per kilowatt hour (kWh) for electricity and 7.42p per kWh for gas.
But in the last 30 days, thousands of customers already on the Octopus Tracker paid a maximum of 21.7p per kWh for electricity and 5.13p per kWh of gas.
Justifying the change, Octopus Energy said in an email to customers: "It's been a good few years since the daily formula was updated.
"Since then, a lot has changed in energy - including a once-in-a-generation energy crisis and regulatory changes. A number of costs have slowly crept up.
"We've been shouldering the extra cost for customers ever since, meaning you've had a particularly great deal.
"We held off updating this for as long as possible, but ultimately, Tracker was designed to transparently reflect real-time energy costs.
"We changed the formula for new customers in December 2023, but held off a few months extra for existing customers."
Octopus Energy is also updating the standing charge to match its other tariffs, and this hike will vary depending on where you live.
How do I sign up and can I change my mind?
New customers wishing to switch to Octopus Energy will need to sign up to its Flexible Energy Tariff first.
They can then sign up to the Tracker Tariff when their online account is set up, as described for existing customers above.
You'll also need to have a smart meter to be eligible for the Octopus Tracker tariff.
Existing customers can initiate a switch in their online account.
If you change your mind and no longer wish to be on the Octopus Tracker, customers can move back to the standard variable tariff without facing a charge.
But this can take up to two weeks during which you could be paying higher prices if wholesale costs are high.
And after leaving, you won't be able to return to the tracker tariff for nine months.
What other similar tariffs are available?
Octopus Energy also allows new and existing customers to switch to its Agile tariff.
Like Octopus Tracker, Agile customer prices are set by wholesale rates.
However, energy prices change half-hourly instead of once per day.
Agile is also the only smart tariff in the UK that passes "negative " prices onto customers.
Suppliers are sometimes paid to take energy from the grid when supply exceeds demand.
However, like the Octopus Tracker, unit prices could shoot up above the levels capped by Ofgem in the colder months when demand rises.
Agile customers are protected by Octopus' "Price Cap Protect" but again, it's important to weigh if any short-term savings are worth it if prices are set to rise in the future.
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E.ON Next's Pledge variable tariff offers a fixed discount of around 3% on Ofgem's price cap rates for 12 months.
It will save the average household around £50 a year but comes with a £50 exit fee if you switch before the year ends.
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