Thames trials single social tariff model

Thames Water has launched a pilot social tariff to extend the eligibility of financial support for customers.

The pilot builds on criteria outlined as part of a proposed novel single social tariff despite the plug being pulled on a nationwide scheme.

Thames chief executive Sarah Bentley told Utility Week that the company was supportive of the proposed single social tariff and keen to build upon work led by CCW for nationwide support.

Bentley was speaking shortly after the launch of Utility Week’s Action on Bills campaign, which is calling for clarity from government on how the water sector can invest without exacerbating affordability woes for billpayers.

Plans for a nationwide single social tariff were rejected by environment secretary Therese Coffey without an alternative being proposed.

Bentley said it was “absolutely critical” to provide a safety net for households needing financial support.

As such, Thames has pushed ahead with its pilot which uses a bill-to-income ratio eligibility criteria for support, which is broader than its other available tariffs.

It builds on research led by CCW which identified water poverty in households where water bills exceed 5% of total net income, once other housing costs and taxes have been removed.

Thames uses this theorem to identify customers in need of support. In the pilot’s first month, 32% of billpayers onboarded for support were identified through the new approach. This equated to 817 of the 2,570 customers seeking support during April.

Bentley said the early success of the trial demonstrates its potential benefits on a wider scale.

“We’ve got this demographically representative sample, we can show the benefit of a single social tariff,” Bentley said. “So, in the future, if there is more support then it’s a model that is ready to go rather than spend another five years in the design.”

Those eligible to access the tariff currently receive a 50% discount on their bills, but the company plans to adapt that in the future.

Thames head of vulnerability strategy Peter Cotton, who developed the novel tariff, said that the company is planning to tweak the scheme to provide greater support to those in greater need, based on their bill-to-income ratio.“We’re considering three tiers of discount because infinite billing combinations would be too difficult to manage,” Cotton said.

Cotton said Thames was able to run the trial it because it already used PayLink’s Income and Expenditure system which captures the data needed to work out eligibility. Thames’ customer base is the largest in the country and diverse across London and the Thames Valley regions, which Cotton explained was a reason the organisation was keen to trial the model.

However, this approach is dependant on a lot of data being available and there are concerns that the bill-to-income ratio is not a realistic way to operate a wider social tariff.

Cotton said Thames was exploring opportunities to work with the Department for Work and Pensions and other utilities to share data, which could make the tariff available to more consumers. Crucially, data-sharing could enable Thames to proactively move customers to the tariff to assist those who are unaware of, or unable to seek support.

Cotton added that this new support mechanism allows for the water sector to “expand away from” solely targeting low-income households. He added: “We are able to identify and support more people with incomes just above the low-income threshold but with higher bills.”

A single social tariff was proposed, first by George Eustice during his time as environment secretary, then developed by CCW as a means to help more billpayers facing affordability concerns, while not preventing necessary capital investments to be made by water companies.

Despite near-universal support the proposal it was binned by the Department for environment, food and rural affairs, which has yet to set out an alternative.