The government is facing calls to introduce a social tariff to help struggling households pay their energy bills as soaring prices threaten to plunge half a million more households into fuel poverty this winter.
Some of the UK’s biggest energy companies have warned ministers that millions of billpayers will need more help this winter as the regulator prepares to reveal one of the biggest increases on record in the world. energy price cap.
The regulator, Ofgem, is expected to raise prices by around £ 150 a year for 15 million homes using a dual-fuel default energy tariff from October, as gas prices hit 16-year highs in the last decade. last week.
The ‘unprecedented’ surge in the global gas market could raise Ofgem’s energy cap, which is calculated on the basis of the cost of providing energy, to a record £ 1,288 on average per year. It would also add more than 500,000 households to the more than three million already in fuel poverty, according to activists.
The looming crisis threatens to deal a particularly hard blow to families hard hit by the financial fallout from the pandemic by coinciding with the end of government leave payments by September.
“This is tough news for all households,” said Jonathan Brearley, Chief Executive Officer of Ofgem. “Therefore, my message to the energy companies is clear: you must provide all the help and support available to customers who are having difficulty with this price change. “
Some of the biggest energy companies, including British Gas, E.ON UK, EDF Energy and Scottish Power, have called on the government to legislate for a social energy tariff, set below the Ofgem price cap, to help households who are often forced to choose between paying their heating bills or buying food.
Michael Lewis, managing director of E.ON UK, said a social tariff should be “one of the main priorities” of new energy legislation next year and “would signal the government’s intention to ‘ensure a fair and equitable energy transition towards net zero ”. , ensuring that no one is left behind ”.
Keith Anderson, managing director of Scottish Power, added that the social tariff should build on the government’s existing warm house rebate, which offers eligible households a £ 140 rebate on the energy bill each winter, but constitutes a “blunt instrument” to fight against fuel poverty.
“I know it’s complicated and that a huge amount of work would have to be done on how it would work, but it’s a reasonable place for the industry to go,” Anderson said.
An industry-funded social tariff could require each supplier to pay a sum into a central kitty based on the number of customers they serve. A discount would then be paid to suppliers according to the number of customers they have in a situation of fuel poverty.
For energy suppliers with more energy-poor customers, the program could add additional costs to their business. Octopus Energy has said it will oppose social tariff calls. Bulb Energy said it would need to see a detailed plan before it could support a social tariff and Ovo Energy said it had not given an opinion.
An Ofgem spokesperson said: “We know that many families are suffering the economic impact of Covid-19 and that energy bills are on the rise. If someone is having trouble paying their energy bills, we encourage them to contact their supplier who will discuss the options with them.
A government spokeswoman said it was continuing to make “significant progress” in tackling fuel poverty and would “invest £ 1.3 billion to improve energy efficiency in homes, thereby helping low-income families to significantly reduce their energy bills ”.