Energy Reset: Three steps to help consumers

As part of Utility Week’s Energy Reset campaign, we present a series of perspectives on tackling the cost of living crisis. Octopus Energy Group’s Rebecca Dibb-Simkin, global director for product and marketing, lists three core solutions she believes will help alleviate the enormous pressure facing consumers.

We started Octopus Energy to drive down energy costs by investing in efficient technology and cheap British generation. We’ve saved our most loyal customers over £1,000 compared to the traditional energy companies and want to continue being able to offer great prices with great customer service.

But as a result of global energy prices, typical households are facing a potential £60 a month price rise for energy in April – a huge burden for most homes.

There has been a lot of discussion about what should be done to protect people from these rises. There are several options being considered by Ofgem, the government, and the energy industry, and there are even some ways we believe that this could have been avoided entirely.

Spreading the cost

The most impactful of these options is spreading the cost of the price rise over several years – it’s the only one big enough to make a real difference to all customers.

It’s impossible to know when wholesale prices will return to normal levels, but the issues leading to the rise are mostly temporary. Spreading the cost of this sudden spike over several years will allow us to make the imminent April rise much, much smaller — more like £12 per month rather than £60 — and adjust prices to gradually cover the cost over time.

And with the benefit of time, the gradual rises are likely to coincide with falling wholesale prices, making the effective increase much smaller, and eventually dropping below current prices.

Should there turn out to be structural issues with our energy market that mean wholesale prices stay high or push even higher, then we will have more time to deal with these at a national and international level, rather than just passing the bill straight through to households and forcing many more households into fuel poverty overnight.

Private funding can be found for deferring these costs which means we may be able to do it without Treasury funding, but that could be a possibility too.

Extending the Warm Home Discount

On a smaller scale, removing VAT and levies, and extending the Warm Home Discount would also be helpful – in fact, a combination may prove the best option overall.

Our electricity is increasingly green so removing environmental charges is overdue. By scrapping green levies and VAT, a typical home can save around £220 a year. This is good, but in the light of a potential £700 a year rise, it doesn’t go quite far enough.

An extension to the Warm Home Discount scheme has the benefit of directing help to where it’s most needed. However, as it stands, it provides £140 respite to around 2.2 million homes.

With National Energy Action estimating at least 6 million households could fall into fuel poverty should the wholesale rises be passed on without some form of support, we will need to massively increase both the number of people eligible and the amount of support provided.

Supplier-specific schemes

Besides working with the government to find long-term solutions to the current crisis, energy suppliers can of course also directly help customers who need it the most this winter.

For example, Octopus have set up a £2.5 million fund to help customers struggling to pay their energy bills. The Octopus Assistance fund can be accessed via a quick and simple online tool that asks customers a series of questions about their financial situation.

This allows us to assess their situation and offer a number of support options based on circumstances and need, including access to existing schemes, monetary credits from the fund or personalised account support.

We are also running an innovative energy efficiency scheme, called Winter Workout, that offers customers helpful advice on how to save energy this winter.

We’ve also bought thermal cameras and lent them to customers for free so they can identify draughts in their house and make simple and low-cost adjustments to keep their home warmer. We’ve sent these cameras to thousands of customers over the last three years.