£900 annual bill discounts mooted for poorer households

A £900 annual discount is one of two main options for a long-term regime to protect low income households from spiralling energy costs, a major new report is due to conclude.

Citizens Advice has been working over the last year with the Social Market Foundation thinktank and polling company Public First on a review of support for consumers struggling to keep on top of their energy bills.

At a meeting of the House of Commons Public Accounts Committee (PAC) this morning (23 February), the advice charity’s principal economic regulation specialist Andy Manning provided a sneak preview of the key findings of the review’s final report, which is due to be published within the next fortnight.

One of the report’s two main options is to offer a fixed discount on bills, which would be “similar to Warms Home Discount, only broader and wider”, he said, referring to the existing scheme that offers an automatic £150 annual payment to eligible households on low incomes.

He said polling carried out for the report shows public support for a substantially bigger £900 discount.

The other option due to be outlined in the report is a discount on unit rates.

But Manning said there remain big question marks over how discounts should be targeted and that while it is “relatively easy” to identify people on means tested benefits and pensioners, extra data will be needed from HMRC to provide support for low-income households not currently receiving benefits.

The meeting, which was held by the PAC to follow up the National Audit Office’s recent report on the government’s energy price support schemes, also heard concerns about the reduction in government help for businesses from this April.

Kate Nicholls, chief executive of UKHospitality, urged suppliers to renegotiate fixed rate contracts taken out with non-domestic customers during the second half of last year when wholesale energy costs rocketed to record levels.

She said that many firms had gone onto these very expensive contracts when the government was offering unlimited support above a cap under its Energy Bills Relief Scheme (EBRS) for non-domestic customers, while only paying a share above this level for their counterparts on floating tariffs.

However since then wholesale prices have plunged and the government is dramatically scaling back support under the EBRS’ replacement, the Energy Bills Discount Scheme (EBDS) that is due to come into force this April, leaving many firms on expensive fixed rate deals hugely out of pocket, Nicholls warned.

To help avoid this “cliff edge” in April and avoid many of their business customers closing, she called on suppliers to renegotiate with those on fixed rate contracts struck in the last six months of 2022.

Some firms faced increases as large as threefold in their energy bills this April due to the relatively meagre support on offer under the EBDS, she said: “The trouble with the universal element of the EBDS is that the discount is so small and spread so thinly that it’s not going to make a difference to the difficult decisions that firms will find themselves in.”

Paul Wilson, policy director at Federation of Small Businesses, called for tighter regulation of third party energy brokers, including the introduction of a 14 day cooling off period after contracts have been agreed.

Ways of tackling fuel poverty will be discussed at Utility Week’s Customer Summit on 21 and 22 March in Birmingham. Find our more here.