Fuel poverty charity National Energy Action (NEA) responds to Ofgem Price cap announcement

The energy regulator Ofgem has today set out the details of the upcoming Default Tariff cap on domestic energy bills. NEA says that whilst many energy customers will welcome some respite and new protections from increasing prices, people experiencing the extremes of fuel poverty will need more help and enhancing the affordability of energy must continue to be a pressing priority.

Adam Scorer, Chief Executive of National Energy Action (NEA) comments: “This is an important, corrective shock to the energy market. Millions of consumers will welcome and benefit from it, but, frankly, on its own, it cannot not do enough to help those in severe fuel poverty.

“The cap is designed to benefit around 11 million Standard Variable Tariff (SVT) customers who don’t, or can’t, engage in the market. They have paid a ‘loyalty premium’ for years and Ofgem is right to tackle it head-on. But, while fuel poor households on SVTs will benefit, there are important questions that need to be addressed in the consultation about whether the inclusion of new policy costs in the future may mean some low income households could get a worse deal.

“Many fuel poor households are more than £1,000 short of being able to afford a warm, dry and healthy home. So this broad tariff protection for the many must be accompanied by a deeper consideration of those already protected by the existing Safeguard Tariff, and more enduring support for those who are condemned to cold, damp, unhealthy homes.”

NEA is calling for:

  • Central investment to improve the energy efficiency of fuel poor homes – the most cost-effective and enduring solution to reduce needless energy costs, eliminate fuel poverty, boost economic growth and safeguard the environment.
  • The GB-wide vulnerable customer Safeguard Tariff to continue alongside the Default Tariff cap and be extended to all households eligible for the Warm Homes Discount scheme. This support should endure after the Default Cap is removed.
  • The £140 rebate under Warm Home Discount scheme to continue for existing recipients and be provided automatically to more low income working families, using powers under the Digital Economy Act to ensure better targeting.
  • Consumers and their representatives should be able to understand what level of protection the new cap provides and whether existing protections could provide greater savings.
  • Ofgem to be robust in putting consumers first when it reviews factors that might drive changes to the level of the Default Tariff cap.

Ends

Notes to editors:

  1. National Energy Action (NEA) works across England, Wales and Northern Ireland to ensure that everyone in the UK can afford to live in a warm, healthy home. For more information visit: www.nea.org.uk

Around 4 million UK households are in fuel poverty, unable to afford to live in a warm, dry home. National Energy Action is the national charity working to end fuel poverty in England, Wales and Northern Ireland. Find out more about the challenge we face, the difference we make, and the difference you can make.

  1. Further information on Ofgem’s announcement today can be found at https://www.ofgem.gov.uk/news-blog/news-press-releases
  2. The levy funded Warm Home Discount (WHD) provides crucial energy bill discounts to low income and vulnerable households across the whole of GB. NEA recently warmly welcomed the fact the new WHD regulations cover the scheme until 2020 to 2021 and that the Government responded positively to the strong case for reducing the obligation participation threshold so the scheme can benefit more customers of smaller suppliers (and therefore reduce some of the barriers to switching). As well as crucial energy bill discounts, via industry initiatives, the policy also now provides more vital support for debt advice and income maximisation services which can provide better value for money than fuel debt write off or even direct yearly rebates.
  3. Within the recent consultation on the immediate future of the scheme, the Government also noted a further consultation on the longer term future of the WHD is now planned for later this year. NEA supports acting on new powers within the Digital Economy Act to better target this support and provide the Core and Broader Group rebates automatically but crucially has stressed the need to keep the existing value of each rebate at £140 for current recipients. Without heeding our suggestion, NEA is concerned the value of rebates currently provided to poorer pensioners (or those that have applied successfully in the past for support under the Broader Group) may be reduced or even stopped altogether.
  4. In addition to preserving the benefits the WHD provides to current recipients (and continuing to help extend this crucial support to other key groups), the vulnerable customer Safeguard Tariff has also been introduced by Ofgem and is available to WHD Broader Group customers that currently receive the WHD. Whilst the Safeguard Tariff cap has increased recently to reflect higher wholesale costs, it still protects a significant proportion of fuel poor customers who may have previously been on more expensive tariffs and would have been exposed to unexpected price increases, regardless of whether the planned wider Default Tariff cap was in place sooner.
  5. Following a recent Ofgem consultation, NEA hoped the Safeguard Tariff would also be extended to an additional 2 million low income consumers who are eligible but may not receive the WHD. This step is crucial as the households who currently miss out on the Safeguard Tariff and WHD are mostly working-age, fall into the lowest income deciles and are already facing thousand pound gaps between their incomes and the essential cost of living. This approach is also fully consistent with Ofgem’s existing statutory duties, the Default Tariff cap legislation and follows through on the stated aims of the UK Government.
  6. During the passage of the Default Tariff Cap legislation in Parliament earlier this summer, NEA stresses it is imperative that the vulnerable customer Safeguard Tariff should not be withdrawn prematurely and as well as being extended to all households eligible for the WHD and operating alongside the Default Tariff wide cap, it should continue alongside the WHD once the wider Default Tariff cap is withdrawn. The UK Government subsequently confirmed there were no legal or policy impediments to following this approach.
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