Concerns have been raised that the recently announced £200 rebate on electricity bills will be unfairly recovered from customers who have not benefited from it themselves.
Chancellor Rishi Sunak unveiled a £9.1 billion support package for customers last week in the wake of the announcement of a £693 increase to the price cap on default tariffs from April.
It included plans for suppliers to give all domestic electricity customers a £200 rebate in October, which will be recovered in £40 instalments over the following five years. English households living in properties in council tax bands A to D will additionally receive a £150 rebate from their local authority that will not have to be repaid.
Speaking to Utility Week, Richard Hall, chief energy economist at Citizens Advice, said the composition of households could change significantly over the repayment period, meaning there is a risk that some consumers who do not benefit from the £200 loan will end up paying it back.
He explained: “I think the government is going to find it very challenging to make sure the people who have received the £200 loan for their bills and the people who repay them are the same.
“You have effectively got a six-year scheme in place. If you look over a six-year horizon, household composition might change by a lot during that time. There will be many people who will get married or move in with partners, get divorced or move out from their partner; some people will pass away with old age; some people will leave home for the first time.
“There is some risk there of people who didn’t receive the loan having to pay it back or vice versa. I think the government is going to have to work quite closely with how it resolves that issue.”
When asked what action could be taken to mitigate this issue, Hall said the favoured approach within industry is to tie the loan to network charges.
“That is probably the simplest solution but it does have the consequence that you are effectively tying the loan to a property rather than to a person which still leaves a lot of scope for people to end up not receiving the benefit but paying for it,” he added.
Hall further criticised the length time it has taken for the government to announce the support measures and said it had “left it to the last minute” – a decision which could impact the design of the scheme.
He continued: “The package of support was announced on the same day as the cap itself and that may have implications in terms of the solutions that are put in place by suppliers.
“For the council tax aspect of it, there’s an existing process in place for the deduction to be delivered. But for this kind of loan to consumers to be delivered and recovered, that’s a process of design work that the industry is now starting on basically from scratch.
“If they had more time to start that process, it would certainly have been beneficial to helping people develop the best solution. Hopefully we will still see a good solution but essentially the sector has got to get everything in place for October which is not actually that far away when you are delivering IT and customer service systems.”
Hall said there are questions over how suppliers will price in the £200 loan in future tariffs as well as what the impact will be on a retailers’ credit ratings.
He added: “There’s a lot of design questions for the sector to work out how to deliver this discount and its subsequent recovery in practice. The more time it has to do that the more likely it is to come up with best possible solution. Announcing things at the last minute was unhelpful in that regard.”
Responding to the comments a spokesperson for the Department for Business, Energy and Industrial Strategy said the government will work closely with industry and consumer groups on how best to deliver support for consumers, and that it will issue a consultation in the spring on the mechanics of the scheme.