‘Fairer, warmer, cheaper’ proposals could transform energy price policy
New research*, ‘Fairer, Warmer, Cheaper…, carried out with Citizens Advice, recommends changes that could transform energy policy.
The authors** begin by stating clearly that existing policy is ‘inadequate for an era of high energy prices’. Among their main recommendations are:
- a new social tariff based on household income and consumption delivered to eligible households without the need to apply
- making better use of government information to identify eligible households
- funding the new tariff from general taxation not a levy on the rest of a supplier’s customers
- continuing to improve energy efficiency by building on the current Energy Company Obligation.
We hope policy-makers and industry leaders will use these proposals to help realise the right of all citizens to an affordable supply.
Each idea is a fresh way of looking at parts of the system most people think are problematic. Here is our summary of the standout points.
Social tariff
Currently there is no energy equivalent to the tariff water suppliers must make available to low-income customers. An energy equivalent would be a positive step in formally acknowledging the right of all citizens to an affordable supply. But there is more to like. Water customers must apply to benefit from the social tariff. A duty on energy suppliers to deliver without having to apply would be a game-changing replacement for hit-and-miss ways of targeting people in need.
Eligibility
A reliable way to identify who is eligible for a new tariff (or any benefit) is crucial. The authors propose building on the existing Warm Homes Discount. But significantly they would also make more use of government information by ‘matching HMRC’s Real Time Information (RTI) on taxpayer incomes with data from the energy industry on households’ energy consumption‘.
Funding
The report says there is no single definition of social tariff. How the system funds payments is a key question. In the water sector there is a levy on other customers. The new research is clear about its answer: ‘Whatever level of support is delivered via the social tariff, funding should come from general taxation rather than levies applied to energy bills. This is an exercise of social policy rather than energy policy and should be funded by the state’.
Energy efficiency
The recommended plan for improving energy efficiency is to enhance the present Energy Company Obligation. This is the scheme through which large suppliers must help eligible customers improve poorly heated or draughty homes. In a range of proposed improvements we again like the potential of better targeting. At the moment suppliers try to meet the obligation by ‘knocking on doors looking for eligible households’. A system giving companies access to HMRC information (as above) plus Valuation Office Agency data on property characteristics, would allow much more cost-efficient targeting.
* Fairer, warmer, cheaper: new energy bill support policies to support British households in an age of high prices, Social Market Foundation, 09/03/23
** Personnel at Social Market Foundation, a non-partisan think-tank and Public First, a policy and research consultancy.