The government must prioritise efficiency upgrades to support households with rising energy bills ahead of another difficult winter
Last week's intervention from the Treasury was a huge relief for the millions of families up and down the country facing the grim prospect of a 42 per cent rise in energy bills from October.
In addition to April’s price cap increase, which has seen household bills rise to almost £2,000, it became clear that the package of support announced in February was insufficient and the government could no longer justify offering a rebate that had to be paid back to the poorest consumers.
High prices have been driven by rises in wholesale gas prices, exacerbated by Russia’s invasion of Ukraine. However, our housing stock, which is particularly leaky compared to elsewhere in Europe, has left us uniquely exposed. In addition to accelerating the rollout of renewable energy, the energy crisis has highlighted we must go further on price protections in the market and energy efficiency.
Disabled people and pensioners not in receipt of means tested benefits will still have to find between £650 and £800
Unprecedented times call for unprecedented action, and I applaud the Chancellor for intervening and providing targeted support for the most vulnerable. Pensioners in receipt of means-tested benefits will now have the full £800 October price increase covered by the Treasury, through the combination of one-off payments and an increase in the rebate to £400, a welcome move. Yet National Energy Action (NEA) estimate that with bills having doubled in the last year, some vulnerable groups including disabled people and pensioners not in receipt of means tested benefits will still have to find between £650 and £800 to cover the price increases seen throughout the year.
Last week Ofgem also announced changes to the energy price cap, which will see it reviewed every three months rather than every six. This could lead to an unwelcome increase in the price cap in the middle of winter.
There have now been two fiscal interventions to support households with energy bills this year. These measures are a welcome relief, but not a long-term solution. In the Queen’s Speech, the government committed to legislate for the energy price cap to be extended beyond 2023. This presents an opportunity to increase the protections in the energy market available for the most vulnerable households.
A social tariff for energy – a below market rate price protection which could be mandated across all suppliers – could be a route towards this. This would present a fair way to provide an affordable price for energy to some of most vulnerable households – particularly those who use a prepayment meter, who are at risk of losing access to energy if they cannot afford to top up. It would provide a more affordable price of energy, shielded from market forces, and would reduce the need for regular fiscal interventions to support people with the cost of energy bills.
In addition to reviewing price protections, it is imperative government support a national effort on energy efficiency to save up to £600 on energy bills. This should be a priority for three reasons. Firstly, it will have a transformational impact on the affordability of energy. The government has a statutory requirement to ensure all fuel-poor households are at EPC band C, an adequate level of energy efficiency, by 2030. Secondly, it is needed to meet our climate objectives in the most cost-effective way. Last, but no means least, it will increase our security of supply by reducing our demand, which will be crucial given the uncertainty of gas supplies this winter and beyond.
There are quick wins on this. Something the government can do right now is bring forward the delayed legislation for the next iteration of the Energy Company Obligation (ECO4) scheme to support low-income households with vital energy-saving insulation measures.
This must be a priority. Failure to do so could see up to 50,000 households miss out on such measures ahead of another difficult winter.
Peter Aldous is the Conservative MP for Waveney.
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