Nearly a decade ago, the former Labour leader Ed Miliband initiated the energy price cap to protect households from unfair tariffs by freezing their energy bills. However, despite the cap being in place since 2018, current energy bills can still be unaffordable, even if deemed fair.
On Friday, the industry regulator Ofgem will establish a new limit on how much suppliers can charge for gas and electricity. Analysts predict that the energy price cap will be lowered from £2,074 to £1,823 for the typical household, which would be the lowest level since Russia’s invasion of Ukraine.
Unfortunately, homeowners should not expect to feel financially better off, as fuel poverty campaigners warn. The winter price cap will still be nearly double the pre-war levels that led to the global energy crisis.
The energy price cap is designed to reflect the underlying cost of supplying gas and electricity to households, meaning that as these costs increase, so does the cap. Although households are assured that the amounts they are charged are fair, this offers little consolation to those who struggle to pay.
Jonathan Brearley, CEO of Ofgem, questions whether this broad and crude price control could be replaced by a more rigorous framework that supports customers. His suggestion prompts consideration for alternative measures such as a “social energy tariff” to provide discounts on bills for vulnerable households.
Multiple charities and non-profit organizations have written to ministers, urging them to swiftly introduce a social energy tariff through legislation. This proposal has gained industry support as well. Unlike the price cap, a social energy tariff could ensure not only fairness but also affordability for the most vulnerable members of society.
Initially, the government appeared receptive to these ideas. However, when consultations were recently released, any mention of a social energy tariff had vanished, leading to concerns that promises were broken.
Simon Francis, coordinator of the End Fuel Poverty Coalition, expresses worry that the government has forsaken its commitments. In a letter to members of parliament, he urges them to pressure the secretary of state to consider implementing a social tariff, particularly for older and disabled individuals, families with young children, unpaid carers, those on lower incomes, and fuel-poor households.
The absence of a social tariff underscores the government’s failure to assist the most vulnerable individuals in society. Although bill payers who receive means-tested benefits will receive additional support for energy bills this winter, millions of others are expected to fall through the gaps.
A study from the University of York reveals that approximately 1.7 million fuel-poor households may miss out on support simply because they do not receive benefits. Among these households, nearly 700,000 have children.
In response, the government claims that energy price projections have improved significantly and that they will continue to monitor the situation while assessing options for supporting the most vulnerable households.
As the price cap offers minimal relief, these households are left to ponder whether an unaffordable energy bill can ever be considered fair.
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