Unspent EBSS money should be used to end standard credit premium

Unspent funds from the government’s Energy Bills Support Scheme (EBSS) should be redistributed to end the premium faced by standard credit customers, an industry expert has urged.

Peter Smith, director of policy and advocacy at charity National Energy Action (NEA), has backed Utility Week’s Action on Bills Campaign which is calling for targeted support for the most vulnerable consumers.

He was speaking after it was recently revealed that £130 million worth of EBSS vouchers for prepayment meter (PPM) customers remained unclaimed with only a month to go before the deadline. The Department for Energy Security and Net Zero (DESNZ) has yet to confirm what will happen with any leftover cash and repeatedly failed to comment when asked by Utility Week.

Asked what should be done with any unspent funds after the 30 June cut-off date, Smith told Utility Week that the it is “absolutely vital” that the funding is targeted at the people who have been worst hit by the energy crisis.

He said: “Typically those households that are on traditional prepayment meters have had to pay higher prices from day one of this energy crisis. We would look to them as a priority group for any further action for supporting them during this autumn and winter.

“The other group that are still struggling, paying much higher than those households that are on direct debit or even now prepayment meters, are those households that are on standard credit. We have known for a long time that they continue to pay a large premium.

“I think it’s £140 now additionally each year just by virtue of paying by cash or by cheque. We are very keen that the government look to spread the benefit of their welcome intervention for prepay customers to pay the same as direct debit customers to those households that are on standard credit.”

Smith also raised concerns about the way PPM customers were targeted by the EBSS, with so many of them are yet to redeem the support. In response, he cautioned against using vouchers again.

He added: “We are concerned that the Energy Bills Support Scheme has led to where we are with the current underspend for traditional prepay and while it’s worked very effectively to provide those households on direct debit or standard credit with assistance, it hasn’t been effective for those households that haven’t got smart prepayment meters.

“We’d be really nervous about just having another voucher-based scheme and for the EBSS to be the exact mechanism. What they could do however is provide equivalent support through retaining some Energy Price Guarantee reduction on the unit rate for PPM customers and they could do that across the different payment types… so in effect they get the benefit of a discount that is smeared over their usage.”

Smith is not the only industry voice to have raised concerns about another voucher scheme.

Speaking to Utility Week recently Fuel Bank Foundation boss Matthew Cole said it is “absolutely essential” that an EBSS is brought in again this winter while a social tariff is developed to be introduced next year but cautioned about the method of delivery, citing a low redemption rate of vouchers during the current scheme.

It comes as government figures show that it spent a total of £39.3 billion between October 2022 and March 2023 to subsidise household bills, around £3 billion less than the c.£42.6 billion it was predicted to spend.

In total the government spent almost £21 billion on the Energy Price Guarantee, which effectively capped prices at £2,500 per annum. It expects that £12 billion will have been paid out under the EBSS, while £5.5 billion was spent on the Energy Bill Relief Scheme for businesses. A further £933 million was spent on other government energy support schemes.

Energy security secretary Grant Shapps said in response: “Putin’s illegal invasion of Ukraine and his reckless attempts to hold the West to ransom sent energy prices spiralling around the world.

“We acted swiftly and decisively to protect families and businesses from the full impact of that shock – covering around half a typical energy bill over winter. This helped safeguard jobs and livelihoods, and enabled many families to heat their homes.”