Early price cap adjustment must come with additional support for customers

An early revision of the price cap to reduce the likelihood of supplier failure must be met with additional support for vulnerable households, a charity boss has warned.

Ofgem revealed in August that record increases to wholesale costs will see the cap rise to its highest ever level. From tomorrow (1 October) customers on default tariffs paying by direct debit will see an increase of £139 – from £1,138 to £1277.

Pre-payment meter (PPM) customers meanwhile will see an increase of £153 – from £1,156 to £1309.

Matt Cole, former head of policy and customer vulnerability at Npower who now heads the Fuel Bank Foundation, believes there will likely be pressure for an early adjustment to the cap this winter to reflect soaring wholesale costs.

Recently Paul Massara, former Npower chief executive, told Utility Week that Ofgem and the government should be considering a one-off adjustment to the price cap, or even quarterly caps, in light of the recent spike in costs for energy retailers. However, former Ofgem chief executive Dermot Nolan told Utility Week there was no justification for loosening the price cap this winter purely in the interest of retailers.

Cole said additional support for customers would be needed if there were any such adjustments.

He told Utility Week: “The October price increase raises rates considerably – and this will put some households into a real crisis where heat becomes a luxury that cannot be afforded on a daily basis. Maintaining the cap as it stands over winter at least provides some surety that rates won’t increase whilst temperatures drop. 

“But in recognising the unique situation that we are in, there will be pressure for an early revision of the rates to ensure supplier costs are covered and to reduce the likelihood of supplier failure this winter. If this happens we absolutely need to see additional support being provided to households who will struggle to bear the increased cost from energy this winter.”

Cole stressed the support would need to be from government, and not necessarily by asking suppliers to provide additional help to those who self-disconnect.

He continued: “There are examples in Europe where additional direct financial help is being provided to households who are struggling, by the government, and we need to learn from this.

“As it stands today, our mix of warm home discount, winter fuel payment and cold weather payments won’t stop people from going cold this winter.”

Elsewhere, charity National Energy Action has warned that tomorrow’s rise could mean an additional half a million consumers will be at risk of fuel poverty, as well as an increase in preventable deaths.

NEA is proposing emergency provision to help fuel poor households over the winter, including additional funding for the warm home discount scheme, supporting more households with the winter fuel payment and enhancing fuel and water direct.

The charity’s chief executive Adam Scorer said while the recently announced £500 million Household Support Fund is welcome, it will not be enough considering the cut to the Universal Credit uplift and rising inflation.

He said: “The massive devastating increases in energy prices will drive over 500,000 more households into fuel poverty, leaving them unable to heat or power their homes. Just when they were needed most, the uplifts to Universal Credit are also being withdrawn and inflation is soaring.

“The new Household Support Fund will provide some welcome support for those who can access it, but on its own it is not enough to halt the erosion in incomes and deal with rising prices.

“Without a wider package of support – keeping UC uplifts and more rebates to protect those on the lowest incomes from spiralling energy prices – vulnerable people are still at dire risk of premature death this winter.”

Additionally, Scorer called for fuel poor households to be prioritised for retrofits to achieve both the government’s net-zero ambitions and statutory fuel poverty targets.

“These quick emergency fixes are vital to get struggling households through this winter, but we can’t lose sight of the long-term solution to reduce the energy waste in our homes.

“We have some of the least efficient housing in Europe. This has left the UK more exposed to the current soaring gas price than many other countries and we are wasting billions of pounds each year as heat escapes through leaky roofs, floors and ceilings.”

Utility Week has launched its Energy Reset campaign, in a bid to ensure the current crisis results in real reform of the energy retail market.