Energy chiefs call for cheaper ‘social tariff’ to help poorest customers cope with cost of living crisis
- The energy industry is after reform to help the poorest families and pensioners
- A cheap ‘social tariff’ would levy bills of low-earning households on the wealthy
- A huge 54% rise in the energy tariff price cap added about £700 to annual bills
Energy industry bosses are pushing for the introduction of a cheap ‘social tariff’ for poorer households, which would be paid for by levies on the bills of the wealthy.
Trade body Energy UK said the market needs serious reform to ensure all households get affordable gas and electricity against the background of soaring bills.
The organisation said the proposal for a social tariff is one of a raft of ideas being discussed with ministers.
The regime would effectively replace the current price cap, which limits tariffs paid by all customers, and switch help instead to the poorest families and pensioners.
Households saw a 54 per cent rise in the energy tariff price cap on April 1, adding about £700 to annual bills taking them close to £2,000.
A cheaper social tariff is one ideas being pushed by energy bosses to help poorer households pay for their energy bills, which jumped 54%, through levies on the bills of richer households
Scottish Power chief executive Keith Anderson said the scheme is ‘what the country needs’ to help poorer households
There are fears of a further rise to £2,600 from October 1. The need for a social tariff has been championed by the Scottish Power chief executive Keith Anderson, who told MPs this week: ‘I am hugely concerned for people… There are so many people who are going to really struggle.’
Mr Anderson said that the Government needs to take immediate action, specifically providing a discount of £1,000 on annual energy bills for the poorest households.
He said the next stage should include the implementation of a social tariff to provide gas and electricity at a discounted price to those who struggle to pay for heat and food, with the cost of this paid for by wealthier households.
‘Moving to a social tariff is what the country needs. And we should implement it when we get a bit more stability and a little bit less volatility in the market,’ he said.
Chief executive at Energy UK Emma Pinchbeck said action is needed urgently to help with bills, combined with major changes to how energy is bought and sold.
‘The retail market needs serious reform. We have lost 29 suppliers,’ she said.
‘We want to have a much better look at what retail is for and make sure that all energy customers get fair and affordable energy.’ She said the proposal made to MPs is ‘take money off wealthier customers to fund a social tariff for poorer customers’.
She added: ‘It is one idea along with reforms to the price cap. The really important thing is that, on top of what we do with the market in the medium term to help people, there is a need for short-term intervention because none of these changes are quick.
‘And none of them are going to be brought in before the autumn, which is when we know the price cap will go up again. So the industry is saying to the Government that we desperately need to do more for what will be a horrible, horrible winter period.’
Industry sources suggest as many as 40 per cent of households could be suffering ‘fuel stress’ this winter, which means they are spending a large proportion of their income on heat and light.
The Government is offering some help in the form of a £150 council tax rebate this month coupled with a loan of £200 in October, which is to be repaid over five years.
However, consumer groups and industry leaders have said that this is nowhere near enough to protect millions from facing a choice between heating and eating.
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