The body representing UK energy firms has called for increased government assistance for households struggling with energy bills. Energy UK stated that persistently high prices over recent years have necessitated emergency support beyond the existing £150 Warm Home Discount for some consumers.
Energy UK's chief executive, Dhara Vyas, highlighted that current support systems are failing to adequately address the needs of millions facing unaffordable bills. She proposed a new "social discount" scheme designed to be more targeted and responsive to changing needs and price levels. This new scheme, which would require access to combined data on customers' income, health, and energy consumption, is estimated to cost approximately £1.9 billion, nearly double the current scheme's cost, but could offer up to £450 in support to eligible households.
This call comes as the energy regulator Ofgem is expected to announce a new energy price cap on Wednesday, which is predicted to reach a three-year high. Energy consultancy Cornwall Insight forecasts a 4% increase for the period covering the first half of the coming winter. This projected rise follows a sharper 13% increase announced in July. Factors contributing to these price hikes include the ongoing conflict in the Middle East and increased power demand across Europe due to heatwaves requiring extensive use of air conditioning.
Ofgem reported that at the close of the last winter, customers owed energy suppliers a record £4.7 billion. While the Warm Home Discount currently assists six million customers who receive means-tested benefits, Energy UK estimates that an additional 2.5 million individuals require help due to factors like medical conditions or poorly insulated homes that increase energy consumption.
The proposed new support scheme could be funded through existing bill levies or shifted entirely to taxpayers via government funding. Such a proposal, particularly concerning the use of personal data and increased public spending, is likely to invite scrutiny. However, Adam Scorer, chief executive of National Energy Action, expressed support for this type of approach, noting that the Warm Home Discount has seen only a minor increase over the past decade. He emphasized the urgent need for innovative solutions to provide relief for those in fuel poverty and called for collaboration between energy companies, charities, and the government to develop an effective scheme.
The projected price cap increase is expected to outweigh the impact of the Prime Minister's decision to remove VAT on household electricity bills starting in October. The last time the price cap reached a comparable level was in July 2023, still below the peaks seen in the year following Russia's invasion of Ukraine, which prompted the government to commit around £40 billion in household energy bill support.