National Energy Action (NEA) has estimated that 6.3 million UK households could be left in fuel poverty this October.
Ahead of Ofgem’s official release tomorrow, this analysis is based on Cornwall Insight’s latest Default Tariff Price Cap prediction for Q4 (1 October to 31 December) which was set at £1,823.
The fuel poverty charity highlighted that although a £251 drop from the current cap, Cornwall Insight’s prediction still prices the cap at roughly £700 more than in October 2021.
As the Energy Bills Support Scheme – which provided households with a £400 discount on their electricity bills to help mitigate the effects of rising energy prices – ended on 30 June, 1.8 million more people will be left in fuel poverty this October compared to the same period in 2022 (4.5 million).
In light of its findings, NEA has called on the government to stand by its commitment to form a new approach to protect vulnerable energy customers, including the consideration of a social tariffs for low-income or vulnerable households.
“Any fall in the price cap is welcome but for 6.3 million households still in fuel poverty it will make precious little difference. The price cap does not protect those who simply cannot afford the cost of keeping warm. That requires direct government intervention through bill support, social tariffs and energy efficiency,” said chief executive of the NEA, Adam Scorer.
“For a third straight winter, vulnerable households will face stubbornly high bills and an increasing energy debt mountain. This winter there is no Price Guarantee and no £400 Energy Bills Support Scheme. The absence of targeted further financial support this winter to reduce the energy bills of the most vulnerable will mean millions of unheated homes and spiralling debt. It will add to the queues of people for the NHS and for the overstretched resources of charities like National Energy Action.”
The organisation’s call joins that of 34 British housing associations which sent a letter to Amanda Solloway MP, minister for energy consumers and affordability and Lord Callanan, minister for energy efficiency and green finance at the Department for Energy Security and Net Zero (DESNZ) urging to more targeted government support for low-income households struggling to pay their bills this winter.
“The UK Government can still act – by directly reducing energy bills via targeted energy discounts or a more targeted Energy Price Guarantee for low-income and vulnerable households. It knows how to do it. It has millions of pounds unspent from previous schemes. It is aware that failing to act will consign millions to another winter of despair and suffering,” Scorer added.
“Beyond this winter, stubbornly high prices are here for the foreseeable future, but the UK Government is backing away from the commitment to consult on a longer-term social tariff. That would leave the energy market stacked against low-income households. It would bake fuel poverty into the system. We also need long term investment in energy efficiency to build fuel poverty out of our homes.”
The alignment of the price cap’s purpose and real role within the market has recently been called into question by a number of industry players.
Earlier this month the Centre for Policy Studies released a report which concluded that the price cap had become a “de facto regulated market price” which effectively removes competition from the market rather than protecting consumers unable to switch tariffs easily as it was intended.
In light of this report Dr Craig Lowrey, principal consultant at Cornwall Insight voiced his own concerns:
“Despite recent reductions in the Default Tariff Cap (price cap), households are still facing bills that are well above historic levels. This has raised questions about the cap’s purpose, its efficacy in safeguarding consumers, and its impact on tariff competition,” said Lowrey.
“In light of this, it becomes crucial to explore alternative measures that can better protect consumers, promote fair competition, and ensure affordable and transparent energy pricing for all. The exploration of options such as social tariffs, energy efficiency initiatives, and various other avenues should be prioritised.”
