EV drivers unsure of future home-charging costs after Government U-turn

The Government will end the energy price cap in March, 18-months earlier than planned, leaving electric vehicle (EV) drivers uncertain over home-charging costs.

In a series of U-turns announced yesterday (Monday, October 17), the new Chancellor, Jeremy Hunt, said that the Energy Price Guarantee, which fixed energy prices from October 1, will be replaced with a more targeted scheme.

Matthew Walters, head of consultancy Services at LeasePlan UK, said: “The Energy Price Guarantee had been one of the key policies announced at the start of Prime Minister Liz Truss’s premiership.

“Importantly, this would have fixed the cost of home electricity at 34p/kWh until October 2022 and offered some certainty for electric vehicle drivers.

“Despite being one of the most expensive policies confirmed during September’s mini-Budget, the cost of charging at home has almost doubled during the last 12 months and was set to rise again in January.

“By removing the cap on energy prices from April 2023, electric vehicle drivers who haven’t already fixed prices with their supplier now face uncertainty about how much it will cost to plug in at home.”

Wholesale gas prices are still volatile, so Walters says that the Treasury-led review must take place quickly and provide details of what replaces the Energy Price Guarantee from next April.

Otherwise, he added: “It risks dissuading people from having the confidence to go electric just as the market is gathering pace.”

Businesses will also be eagerly awaiting the details of future support for energy prices. They are not protected by the Ofgem price cap and are dealing with spiralling operating costs, with limited details about how the current support system would protect them from further increases.

“This includes public charge point operators, and we have seen prices reaching £1 per kWh for some networks in recent weeks,” said Walters.

“That is a significant cost for fleets who depend on this infrastructure, but also for drivers without off-street parking.”

Reducing the basic rate of income tax from 20% to 19% was also kicked into touch, which Walters says would have offered a “welcome 5% reduction” in benefit-in-kind (BIK) tax for around 300,000 company car drivers from April 2023.

“That amounts to an annual saving of between £50 and £100 for a typical petrol, diesel or hybrid vehicle,” he said.

“Although small, that would have offered a useful tax cut for households who are already facing rising living costs. Especially as ongoing shortages of semiconductors and other critical components have left many of them waiting a year or more for low-CO2 electric and plug-in hybrid cars. Often while still driving a vehicle in a much higher benefit-in-kind band.”

The Chancellor has also signalled that changes to the 20% income tax rate will be delayed ‘indefinitely’, which follows last week’s U-turn on the 45% band.

Walters said: “The focus of this ‘Emergency Budget’ was to stabilise markets following several weeks of turbulence, so we weren’t expecting many details for fleets.

“However, this is the second of three fiscal events within a six-week period and does little to address some of the biggest question marks for fleet operators.

“Most importantly, HM Treasury must publish Company Car Tax bands from 2025-26 and beyond.”

Drivers and fleet operators taking delivery of new vehicles today have no idea what BIK and National Insurance contributions they will be paying during the final years of that contract.

“That uncertainty has become even more problematic as drivers are often waiting more than a year for new orders to be delivered,” he added.

“Fleets will also be eagerly awaiting changes to the Advisory Electric Rate (AER) used for reimbursing the cost of charging an electric vehicle. This has been fixed at 5p per mile since November 2021, despite sizeable increases in charging costs – especially for public charge points – in the meantime. In many cases, this is leaving drivers out of pocket.

“The fleet sector relies on long-term certainty and the ability to make procurement decisions with confidence, and they can wait no longer.

“The new Chancellor has his work cut out clearing a backlog of vitally important fiscal decisions and this process must begin at the next proper Budget.”

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