Hourly rates will soon be offered to millions of households

Hourly rates will soon be offered to millions of households

Electricity rates could soon be offered to millions of homes across the country with prices changing every half hour.

Under new powers to be given to energy regulator Ofgem in May, smart meters will automatically send usage information to providers every 30 minutes. Providers could use this information to charge consumers more during peak hours. However, for now, customers will need to "opt in" to share this data.

Ofgem said the change will roll out to all new smart meters by 2025, but people who already have a smart meter will not be affected unless they enter into a new contract.

Currently Scottish Power, EDF and Octopus Energy support all of the proposed changes. They currently collectively supply power to 11 million homes.

How will the new prices work?

With so-called "hourly rates," customers are charged more for their energy during the busiest times of the day, such as at night. Less is charged at quieter times, such as at night. As a result, bill payers can benefit from lower prices by shifting their usage to quieter times when prices are cheaper.

Today, most energy users have tariffs that charge a flat fee for usage. However, a small number of households with smart meters that have already opted in to half-hourly updates can access time-of-use rates. EDF, Scottish Power and Octopus currently offer these rates, and people with Economy 7 or Economy 10 meters can benefit from cheaper off-peak rates.

Considering whether the change could be good for customers, Gillian Cooper, energy policy manager at Citizens Advice, said: "As prices reach record highs, smart meters can help us manage our energy use and ensure we get more accurate bills.

“In the future, an hourly usage fee could allow us to get better value for money if we are able to be flexible about when we use electricity.

“There is no one size fits all, so we will all need information and advice to make sure we choose a fare that meets our needs.

"Strong protections need to be put in place for those of us who can't be flexible with our electricity use, so we all pay a fair price."

Will hourly rates reduce bills?

Time-of-use rates are expected to save people who use rates and those who stay with traditional rates. In fact, the distribution of demand and the avoidance of peaks in energy consumption could generate savings in the entire electrical network. The costs of running the network are shared by all and efforts to reduce these costs would be passed on to all equally.

An Ofgem spokesperson said: 'This major upgrade to the system is an important step on Britain's journey towards net zero.

“This will enable a more efficient, flexible and greener energy system that will save billions of pounds a year on energy bills for all consumers.

"Ofgem will work closely with the industry to ensure it delivers this important update while also ensuring that people in vulnerable situations remain protected."

However, the news that energy will cost more at peak times will come as a shock to millions of people currently facing a "cost of living crisis." Last week it was announced that the energy price cap would increase by 54%. Despite this, customers are advised to avoid doing an online power comparison, as the best power deals on the market from the nation's top power providers cannot exceed the new price cap.

In addition to that, Ofgem also told MPs that current forecasts suggest another increase is likely to come into force before next winter. Some analysts now believe that the maximum price could reach around €2300 from October 1.