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Charities slam ‘unacceptable’ £74m Warm Home Discount underspend

Fuel poverty charities have slammed a £74 million underspend in the annual Warm Home Discount scheme as “unacceptable” and have called for the money to be paid to those who missed out.

Fuel Bank Foundation and National Energy Action were responding to the publication of Ofgem’s latest report on the scheme, covering obligation year 2022-23.

The regulator highlighted how the total budget for the scheme was £523 million and that although suppliers broadly achieved their collective spending obligations, there was a £74 million underspend on rebates which was split between Core Group 1 (£15 million), Core Group 2 (£58 million), and Core Group (Scotland) (£1 million).

Ofgem stresses that “the vast majority” of the £74 million shortfall “was not the result of an administrative failure or non-compliance by obligated suppliers”.

But speaking to Utility Week about the shortfall Matthew Cole, head of Fuel Bank Foundation, said the funds could have paid for almost half a million WHDs.

Cole added: “Charities such as Fuel Bank had to plug gaps when households simply didn’t have the cash they needed to get warm and stay warm, in particular over winter, and the update from Ofgem amplifies some of the concerns that we heard from our clients over the same period, that some households believed they had missed out on some of the support that was available, and it was complex to remedy this and to access the help that they believed they were entitled to.”

Echoing these concerns, National Energy Action’s head of policy Matthew Copeland said: “This report covers the winter before last when we were really in the depths of the energy crisis, a time when people needed that money.

“We completely accept that suppliers weren’t at fault on this but we really need to have a look at what did go wrong and make sure it doesn’t happen in future scheme years.

“It’s unacceptable that half a million people who are entitled to a discount aren’t getting it.”

Both charities have called for the funds to be paid to those eligible.

Ofgem explained that several factors contributed to suppliers receiving fewer instructions to pay rebates than expected.

The budget for Core Group 1 (England & Wales) and Core Group (Scotland) is based on estimates of the number of households in receipt of Pension Credit Guarantee Credit who will be eligible for the WHD.

The government also includes a projection of the number of additional households that they expect to become eligible for Pension Credit Guarantee Credit, and therefore meet the WHD eligibility criteria, after the main data-matching process to identify eligible households has taken place.

“The actual number of households that became eligible after the initial assessment was lower than expected, meaning more rebates were expected than suppliers received instructions to pay,” Ofgem said.

Furthermore, fewer households than expected called the dedicated Warm Home Discount helpline after not automatically receiving a rebate. Despite being sent letters advising them to call the helpline, a lot fewer households than expected did so.

The Department for Energy Security and Net Zero (DESNZ) believes there may be two reasons for this.

The report further explained: “The first reason is that more of such households than estimated may not have been named on the energy bill (which is an eligibility condition), and therefore decided not to make contact.

“The second reason is that some households may not have understood that they were eligible as they had already received other forms of support available over the winter, namely the Energy Bills Support Scheme and Cost of Living Payments.”

In England and Wales DESNZ made adjustments in SY13 to mitigate the risk of a similar underspend under Core Group 2. This entailed lowering the threshold for households considered as having high energy costs, thereby expanding the eligible cohort.

Additionally, across both WHD schemes in England & Wales and in Scotland, DESNZ is rolling forward the underspend so that, as closely as possible, the intended amount of funding is spent supporting fuel-poor households via rebates across the remaining years of the scheme.

Elsewhere in the report, four suppliers are named as failing to meet their individual non-core spending obligations which resulted in a spending shortfall of £13,431.

In England & Wales So Energy and Utilita both failed to meet their non-core spending obligations through Industry Initiatives.

So Energy achieved 99.45% of its obligation, leaving a shortfall of £2,069, while Utilita achieved 99.24%, leaving a shortfall of £8,888.

A spokesperson for Utilita told Utility Week that the shortfall was “entirely down to a reporting error” by one of its third-party partners.

“Once aware of the issue, we immediately contacted Ofgem and proposed remedial action of ringfencing a further £9,000 in financial support for vulnerable customers,” it added.

In Scotland, Ecotricity achieved 99.91% of its obligation, leaving a shortfall of £98, and Good Energy achieved 96.02% leaving a shortfall of £2,376.

Furthermore Foxglove, which trades as Outfox the Market, and Utility Warehouse, were found to be non-compliant with their reporting obligations for both the England & Wales and Scotland schemes. Foxglove was additionally found to be non-compliant due to a failure to identify customers eligible for Broader Group rebates in Scotland.

During scheme year 12 obligated energy suppliers spent almost £444 million supporting eligible low-income households by providing £150 rebates and through Industry Initiatives (£395.2 million was spent in England & Wales and £48.5 million in Scotland).

This is an increase of 23% on the £359.4 million spent during the previous scheme year.