A blog by Peter Smith, Director of Policy and Advocacy at National Energy Action
For anyone who has just come back from a late summer holiday (or planet Mars!), we are now in an energy crisis. Wholesale gas prices have reached record levels. In September 2021, month-ahead gas prices surged to more than five times the price a year ago. When combined with soaring inflation above 3% and an imminent reduction in Universal credit, the poorest households will find it particularly difficult to keep warm this winter. As well as consumer pain, the number of energy suppliers failing because of the energy crisis is growing day by day. There are already well over a million customers now being automatically transferred to a new supplier; one they never chose and are very likely to charge them far more. There are some critical short-term issues which need to be urgently addressed:
- We are very concerned about legacy pre-payment customers. Households on older prepay meters are at risk of not being able to top up with their new supplier if their current supplier fails. New smart meters don’t have the same issues, but it will take time to replace them. We need to find a quicker solution to this key issue without any delay.
- People in debt who transfer over to their new suppliers may also immediately risk aggressive debt recovery tactics from their previous suppliers’ administrators. This can’t be allowed; debt repayment plans must be honoured by their new supplier who should ensure any debts reflect their customer’s ability to pay.
- People eligible for Warm Home Discount are also falling through the gaps when they move to their new supplier. They often can’t access all elements of this vital support.
Beyond these immediate and vital issues, the upcoming winter poses a significant challenge. We know the long-term solution must be to reduce the energy waste in our homes. We have some of the least efficient housing in Europe. This has left the UK more exposed to the current soaring gas price than many other countries and we are wasting billions of pounds each year as heat escapes through leaky roofs, floors and ceilings. Again, the poorest are hit hardest, they disproportionately live in the least efficient homes. Addressing the challenge of our leaky homes must continue to be a key priority but given the urgency of the current crisis we also need to look concurrently at how to directly reduce bills for more households most in need this winter.
Policy Exchange yesterday recently released a very helpful blog with key options to help make energy more affordable during this gas price crisis. They considered things like freezing prices, giving rebates to all households, deferring investment, and cutting carbon prices. They settled on increasing existing discounts for fuel poor households as the most attractive option for policymakers, through putting more money into the Warm Home Discount (WHD) scheme this Winter. Its hugely welcome to see these options being considered and we agree with the need to give priority for emergency help to the poorest energy consumers this winter. The WHD scheme also presents a practical and politically feasible way of doing this and with a few tweaks any increase would not have to be funded by consumers.
Ensuring WHD eligible households receive key rebates is undoubtedly a good thing but whilst we fully support the expansion of WHD, some of those most in need could still miss out. Low-income households who do not receive a means tested benefits do not typically qualify for a WHD rebate. Added to this, the WHD scheme only covers Great Britain and those most in need in Northern Ireland would not receive help, despite their gas bills already going up by 35%. A possible solution would be to ensure that any expansion to the WHD scheme includes additional funding for industry initiatives. This vital but often forgotten element of the programme is not restricted to helping those in receipt of benefits and provides energy advice, benefits entitlement checks, fuel vouchers and energy debt clearance. This support could be vital in the weeks and months ahead.
Another option is to look at the Winter Fuel Payment (WFP). The WFP has historically been politically untouchable, but this crisis underlines the need to consider all options. The cash payment is paid to nearly all pensioners across the UK to provide extra help with heating bills. Its key advantage is also it’s a drawback. It helps those not on benefits, but it is relatively poorly targeted, with everyone over 66 receiving the payment, regardless of their income or wealth. One way of reaching more households most in need, particularly in Northern Ireland, would be to expand the eligibility of payments to the eligible pool for ‘Cold Weather Payments’. The CWP is broadly the same as those who are eligible for the WHD but would help poorer households in NI and would be relatively easy to administer, as all eligible households can be Data Matched by DWP and households would not need to apply.
Other complementary measures would also help:
- Obviously, maintaining the uplift to Universal Credit would be a key starting point!
- Maintaining a package of extra targeted financial support for those in need over the winter period via the Winter Grant Scheme. The scheme provided funding to support those in need with the cost of food, energy and water bills and other associated costs.
- The Government should also help accelerate the repayment of utility debts. Doing this would have the dual benefit of helping those households struggling the most and improve the viability of energy suppliers by reducing their own bad debt.
The good news is there are plenty of options to help the poorest survive this energy crisis this winter. As we approach the colder months, these issues become much more pressing. The upcoming Budget will be vital if any of these options can help this winter and reduce the impact of the current crisis. In the meantime, we need to see some early progress in the coming days and weeks. The UK Government and Ofgem’s key urgent priority should be to ensure vulnerable households are protected when their supplier fails. We can’t however allow short-term fixes to detract us from the real task at hand, addressing our cold and leaky homes. If we lose sight of this, particularly within the Spending Review, we are likely to be back here again every winter.