OVO Energy has revealed a 10-point plan aiming to tackle the national energy crisis as bills continue to soar.
The plan has been created with the input of regulators, the government, consumer groups and industry to create a scenario that is best suited at tackling the cost of energy.
OVO developed the plan after Ofgem increased the energy price cap to £3,549 per year for dual fuel for an average household set to come into effect from 1 October 2022.
The recommendations have been categorised into three distinct areas including short-term, medium-term and long-term.
In the short term, OVO believes the energy rebate should be paid in full before Christmas, a Fuel Poverty Taskforce should be set up in order to identify households in the UK that need support as well as immediately increasing funding for debt advisory charities.
OVO states that the £400 Energy Bill Support Scheme is not perfect, however it is an existing mechanism set in place that should be used in order to tackle the energy crisis. The company believes the rebate should be paid in full to households within the next three months.
The Fuel Poverty Taskforce should be able to utilise data held by charities, energy companies and governmental departments in order to allocate support to vulnerable households that are unable to make any further cuts to their bills.
OVO also states that Citizens Advice has seen an increase in people seeking advice on their energy bills with it rising by more than 1000%. Because of this, these charities urgently need more funding to help support households amid the energy crisis.
In the medium term, OVO suggests that an abolishment of the prepayment meter poverty penalty should be sought, the government should reduce bill shocks in a progressive way, they should make bills simpler and fairer by abolishing the standing charge and mobilise a national energy efficiency effort.
Under the regulations set by Ofgem, prepayment meter customer pays around £59 more per year than a customer paying by monthly direct debit, says OVO. The company believes Ofgem should lower the unit rates under the price cap to make sure a prepayment meter is the cheapest way to pay for energy.
To reduce bill shocks, OVO believes bills should be subsidised through a ‘Tariff Deficit Fund’ and repaid over a period of years however this scheme cannot be open ended and unlimited. It should be progressive just like the tax system.
The company suggests this can best be achieved through limiting the number of subsidised units of energy households receive, as higher-income households typically use more energy.
Standing charges is the simplest way to make energy easy to understand, states OVO. Removing it will benefit low-income households more than wealthy households, and further reward energy efficiency.
The final medium-term recommendation calls on a national energy efficiency effort much like what the UK witnessed during the Second World War in which the public reduced food imports via growing their own produce on land.
OVO believes the UK needs a national effort to insulate. In order to lower bills further, regressive social policy costs should be removed and shifted into the more progressive general taxation regime.
In the long-term, OVO believes the UK must ensure the future system operator has a mandate for securing long-term energy demand, the government should bring back the Department of Energy and Climate Change and a carbon tax should be introduced.
According to OVO, the mechanics of the price cap means the firm is now buying three months in advance. This exposes UK consumers and the economy to extreme price volatility.
To cater for energy bills in the future, the future system operator should be expanded to allow for the long-term procurement of the nation’s primary energy needs guaranteeing physical supply and providing price stability.
As well as this, bringing back the Department of Energy and Climate change could provide the UK with a boost to its renewable sectors and help expand low-carbon technologies which could prove vital in reducing reliance on fossil fuels.
OVO states bringing this department would mean the Secretary of State is solely focused on building a low-cost, low-carbon energy system.
The final factor calls for the introduction of a carbon tax. It will tax the profits of big oil and gas companies on an ongoing basis, rather than the one-off gain companies get from a windfall tax.
The revenue collected from a carbon tax should then be used to protect the public from adverse cost impacts and invested in decarbonisation.