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Calls for social energy tariff to be introduced now, not in 2024

Emma Lunn
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Emma Lunn

Energy firms are being urged to introduce ‘social’ energy tariffs to help the most financially vulnerable households.

Consumer champion Which? has urged the Government to introduce cheaper energy tariffs for low income households after warning that some of the most vulnerable billpayers could be left an average of £209 out of pocket when energy support ends.

The end of energy bills support

The Energy Bills Support Scheme offered every household a £66 or £67 discount on their energy bill each month from October 2022 to April 2023 – but the scheme has now ended.

Even with the Government’s decision to keep the Energy Price Guarantee at £2,500 for an average household until the end of June, Which? research found that millions of low income households will still face higher energy bills this financial year.

Although energy prices are predicted to drop to around £2,000 for the average household from July, consumers will still be paying almost double the amount they paid before the energy crisis began.

Low income households worse off

Which? predicts that this will mean the poorest 10% of households will have to spend an average of £209 more on energy this financial year than in the last financial year.

Whether a household falls into the poorest 10% of households depends on both income and family size. For example, a single person household in this group would earn less than £9,800 per year, while a couple with two children would earn less than £20,500 after taxes and benefits are taken into account.

The group estimates that despite the lowest income households typically using less energy, they will be £75 worse off a year than a household with average energy consumption – who will spend £135 more on energy bills next financial year.

This is because the average low income household uses less energy than those on higher incomes, so they will not benefit as much from lower energy prices but will still feel the loss of £400 of additional support from the Energy Bill Support Scheme.

Prepayment meters woes

Higher costs could be especially difficult to manage for prepayment meter users – who are typically on lower incomes – as they cannot spread costs across the year and would see a spike in costs during the cold winter months.

Which? said the Government does not currently have an effective means of targeting financial support towards those on the lowest incomes in time for this coming winter.

Ministers have announced that cost-of-living payments to those on qualifying benefits will continue. However, Which? said this will leave low income households who are struggling to make ends meet, but do not qualify for benefits, out in the cold.

Calls for a social energy tariff

Which? said that a “properly targeted” social tariff – a discounted energy rate for those most in need – is desperately needed to ensure energy affordability for those who need it most.

Recent Citizens Advice proposals have shown how a social tariff could be designed to effectively target support where it is most needed. This would be based on both household income and energy usage, without creating a cliff-edge based on benefits eligibility.

Just last week, the Government’s Powering Up Britain blueprint committed to a new approach to consumer protection – such as a social tariff – in place by April 2024 but Which? said the Government needs to take action on this as a matter of urgency and has recommended that ministers introduce a social tariff along these lines as soon as possible.

Social tariffs are already available to broadband customers.

Rocio Concha, Which? director of policy and advocacy, said: “It’s hugely worrying that consumers on the lowest incomes could be left over £200 worse off on their energy bills this financial year due to reduced Government support.

“With millions of low-income households across the country already struggling to make ends meet, the Government urgently needs to introduce a properly targeted energy social tariff to ensure the most financially vulnerable are able to heat their homes.”