‘Significant momentum’ behind social energy tariff

There is now “significant momentum” behind the idea of a social energy tariff, with cross-party support in Parliament and backing from multiple large suppliers, according to a senior figure at National Energy Action.

Matt Copeland, head of policy at the fuel poverty charity, made the comments in response to the Business, Energy and Industrial Strategy (BEIS) Committee’s report into the energy retail market.

One of the key recommendations of the report is for the government to consider introducing a social tariff for the most vulnerable customers and a relative price cap for the rest of the market.

Voluntary social tariffs were first introduced to the energy sector in the 2000s in an attempt by government to protect the poorest consumers from fuel price rises without the need to interfere in the market or invest excessive amounts of public money.

According to NEA the success of these was limited as social tariffs were not targeted well on fuel poor households. Additionally the voluntary nature of the scheme resulted in a “scattered approach”. In 2011 the Coalition government decided that a better solution was to introduce the Warm Home Discount.

Asked if the government is likely to heed the report’s recommendations on a social tariff, Copeland said: “I think that there’s quite significant momentum behind the social tariff now. Obviously, we have the BEIS Committee, cross party MPs, asking the government to at least consider it.

“But then across Parliament there are politicians advocating for social tariffs… So I think there’s quite a lot of political salience behind the idea of a social tariff now.”

One example given by Copeland was Conservative MP Peter Aldous who has raised the issue several times in recent debates in the Commons.

Similarly Liberal Democrat MP Jamie Stone suggested the introduction of a social tariff in a Westminster Hall debate in January, while Labour MP Yvonne Fovargue also suggested backing a social tariff in a budget resolutions debate last November.

Copeland said there are also a number of large energy suppliers calling for a social tariff such as Eon, EDF and Scottish Power.

He said there are lessons to be learned from the previous iteration of the tariffs in the energy sector and also from the system currently used in the water sector.

Previously the amount of support offered, if any, depended on the customer’s supplier.

He added: “It was very much similar to water at the moment where each water company has to give a social tariff but it’s not set centrally who receives it and how much of a discount they get. And that does create a postcode lottery across the country, which is a really inherent unfairness in the way that social tariffs work in water.”

The Consumer Council for Water (CCW) is currently advocating for the UK and Welsh governments to create a single social tariff to address this issue. Furthermore, customers have to apply to their retailer in order to access it, which Copeland said should be avoided in the energy sector.

Vulnerable customers, he said, should be identified by their retailer and automatically enrolled.

Copeland added: “I think there are several options that could be considered but the simplest one is just to give a different price cap to a set of households that were automatically identified.

“Through the same mechanisms that suppliers can identify low income households for the Warm Home Discount, they could automatically identify all of their customers who are in receipt of means tested benefits and then the be mandated to offer them a social tariff, which would be below the price cap cost, so a lower unit rate.”

In contrast to the BEIS Committee, NEA has called for a social tariff to be implemented alongside the existing price cap rather than moving to a relative price cap for the rest of the market.