‘Perverse’ price cap outcome could increase bills for poorest

The poorest customers could end up paying more for their energy bills following the introduction of the government’s price cap, Alan Whitehead has warned.

Speaking in a fringe event at the Labour annual conference on Monday (24 September), the shadow energy minister said that higher bills for the most hard-up customers could be a “perverse outcome” of the market-wide cap on standard variable tariffs (SVTs).

He expressed concern at the event, which was organised by Energy UK, about how the safeguard tariff for vulnerable customers is due to be absorbed into the wider cap on SVTs due to differences in the way they are calculated.

Whitehead said: “The concern now is that with the wider price cap coming in, the original assistance to vulnerable customers will be subsumed into the wider price cap with the effect that vulnerable customers may be paying more under that original price cap.”

His concerns were echoed by Peter Smith, director of policy and research at fuel poverty campaign National Energy Action.

He said: “The risk in the short term that the emergence of the wider price cap doesn’t hurt vulnerable customers and leads to a significantly worse off position compared to if the UK government and Ofgem had done what they said they would do and extend the safeguard tariff.”

Whitehead also said that Ofgem’s approach to vulnerable customers is too “passive”.

“Clearly there should be a much more active role for the regulator in terms of setting out the way the system works.”

He told the event that Labour would revive the National Energy Efficiency Helpline, which had been scrapped by the coalition government, to help vulnerable customers cut their fuel bills, more rigorously monitor the installation of energy efficiency measures and introduce an updated version of the zero carbon code for new build properties.

Whitehead said: “We are still building homes that in the not too distant future we will be retrofitting: it’s a barmy state of affairs.

“Certainly a new Labour government would not only reintroduce the zero carbon policy but because some time has elapsed we need to accelerate the terms under which those targets need to be reached.”

At the same event, Energy UK policy director Audrey Gallacher said that the body’s upcoming report on vulnerable customers would address concerns that welfare-dependent households are struggling to pay their bills due to benefits cuts.