1 million vulnerable customers could be worse off under new energy price cap

The Chair of the Business, Energy and Industrial Strategy Select Committee has commented on Ofgem’s announcement yesterday on the final level of the energy price cap and written to the Business Secretary over concerns that up to 1 million vulnerable customers may lose out.

@RachelReevesMP letter to Greg Clark expressed her concern over the implementation of the price cap and protections for vulnerable customers. She has said “…some vulnerable customers may ultimately end up paying more under the new regime than they otherwise would have done. This outcome would be entirely contrary to the intention of my Committee, and I think Parliament, in approving the legislation, and run contrary to Ofgem’s responsibilities to look after the needs of different groups of vulnerable customers”. @alanwhiteheadmp (the Opposition Shadow Energy Minister) has also similarly raised concern over the impact the price cap would have on those most vulnerable. See: https://www.parliament.uk/business/committees/committees-a-z/commons-select/business-energy-industrial-strategy/news-parliament-2017/chair-comments-ofgem-energy-cap-17-19/.

In response, NEA believes there are three opportunities it will now be even more crucial for the UK Government, the regulator and the industry to seize:

  1. The £140 rebate under Warm Home Discount scheme must continue for existing low-income pensioner recipients and be provided automatically to more low income working families, using powers under the Digital Economy Act to ensure better targeting.
  2. Ofgem should investigate the setting of and recovery of costs within Fuel Direct repayments and standing charges to ensure low income consumers that may only top up their pre-payment meters rarely, don’t lose credit before they can access any energy.
  3. If the Government choose to extend the current smart meter deadline, it must also work with the Competition Markets Authority (CMA) to investigate an extension to the Pre-Payment Meter price cap.

Our recent paper, fleshed out these options in more detail and we hope this more targeted set of interventions will help deliver much more positive outcomes for the most disadvantaged customers this winter. We must also not lose sight of the fact that improving the energy efficiency of homes continues to be the most cost effective and sustainable way to address these issues. Here there is also a large gap between action to deliver warm and efficient homes, and rhetoric to do so, which now also needs to be addressed urgently. NEA will shortly be setting out our view on the areas that must be addressed within the upcoming Comprehensive Spending Review in 2019 to ensure that everyone in the UK can afford to live in a warm, dry home.

Peter Smith is Director of Policy and Research at National Energy Action (NEA), if you have any comments on this blog, please contact him at peter.smith@nea.org.uk.

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