Ministers have said they are looking at “a range of support” for vulnerable households struggling with rising bills as the average household cost is due to rise to £1,729 a year.
The new Energy Secretary Miatta Fahnbulleh acknowledged that the £150 winter Warm Home Discount is “a start” but that many households need more support with their bills.
Price Cap Announcement Expected
Ms Fahnbulleh has issued the update ahead of an expected energy price cap hike. Ofgem will reveal on Wednesday (August 26) the level of the annual energy price cap for the three months from October to December, for a typical household using gas and electricity in England, Scotland and Wales.
The new Energy Secretary added that standing charges are “too expensive” for some and said the Government is working with regulator Ofgem to examine “how these fixed costs could be recovered in the fairest way”. She suggested more policy costs could be removed from energy bills in a bid to drive them down.
Bills to Climb to Three-Year High
It comes as households are bracing for energy bills to climb to the highest level for three years heading into winter, despite Prime Minister Andy Burnham’s plan to remove VAT from electricity bills from October.
Forecasts have indicated that households will see their bills rise by another 4% to the equivalent of £1,729 a year in the latest hike, as the conflict in the Middle East continues to push up wholesale energy prices.
Ms Fahnbulleh on Tuesday said she understood “why people are worried and frustrated about energy bills”, and that Mr Burnham’s Government is “doing everything we can to make them more affordable”.
Warm Home Discount ‘a Start’
The Peckham MP indicated households most in need could be in line for more support when she was asked during an “ask me anything” session on the Reddit online network whether she believed the existing £150 warm home discount is enough.
She replied: “I know in Peckham that our warm home discount will assist nearly a third of households. It’s a start, but I also know that households struggling need more help.
“That is why we are looking at a range of support for vulnerable households that are under pressure. From long-term targeted bill support through to upgrading millions of homes with measures that can save over £500 on bills.”
Standing Charges Under Review
Ms Fahnbulleh also suggested there could be changes to the fixed charge on bills paid every day regardless of energy usage.
She wrote: “I know for lots of people, standing charges are a real bugbear. The reality is that they cover fixed costs that we have to pay to keep the energy system running.
“We understand that for some, this is too expensive. But removing those costs would simply increase prices elsewhere on the bill, so we are working closely with Ofgem to look into how these fixed costs could be recovered in the fairest way.”
Urged to remove all policy costs from bills, Ms Fahnbulleh said the Labour Government had “started” doing so, including by ditching an energy efficiency programme which was paid for through levies on bills.
She said: “These policy costs fund important things like supporting vulnerable consumers with the costs of their bills and upgrading the energy system so that we can lower bills.
“We have already started doing this and did so at the budget, where we took a load of policy costs off of bills. We’ll keep looking at how these costs are recovered in the fairest way.”
Mr Burnham’s pledge to cut VAT from household electricity bills, which he predicted would knock around £45 off the annual Ofgem price cap from October, will be more than offset by the recent swing in global energy prices.
Ms Fahnbulleh said: “I completely understand why people are worried and frustrated about energy bills and we are doing everything we can to make them more affordable.
“As a start, we removed VAT from electricity bills to give everyone some breathing space. This is on top of the £150 we removed from energy bills in the budget in April.
“We are providing extra support for six million families under pressure with our £150 warm home discount.
“But we know there is more to do and we are getting on with the job of driving bills down.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “The Energy Secretary is right that households need more help. Volatile gas prices are driving the next increase in energy bills and these are set by what global markets determine.
“When the new price cap is announced, every unit of gas is likely to come in at 26% higher than last year and more than 150% higher than in winter 2020. This will force households to spend more on the same amount of energy, or cut back even more on their energy use.
“The Government has made a start by cutting VAT on electricity and extending the warm home discount last year, but ministers must go further and faster. That means funding a proper energy debt relief scheme before winter and getting insulation and heat pumps into the homes that need them most.
“But while millions of households suffer, a handful of energy firms have banked more than £6 billion in UK profits this year alone. Billpayers are being asked to pay more, while billionaires count the profits.”
