Supplementary written evidence submitted by National Energy Action (WIN0056)
About National Energy Action (NEA) and Introduction to our Submission
1.1. NEA works across England, Wales and Northern Ireland to ensure that everyone in the UK can afford to live in a warm, dry home. To achieve this, we champion and deliver energy efficiency programmes, aim to improve access to energy and debt advice, provide training, and coordinate other related services which can help change lives.
1.2. Our submission centres around the need to learn from the government’s previous support for energy bills over the winter of 2022-23, and how can we use these lessons to prepare for the winter to come with energy bills predicted to remain stubbornly high.
2.1. NEA gave oral evidence to the select committee. A few areas called for some supplementary written evidence.
2.2. The Committee asked about the number of prepayment meters that are smart. Our understanding is that approximately 50% of prepayment meters are smart, and there are 4.5m prepay customers.
2.3. The Committee also asked more about a social tariff and standing charges. On a social tariff, appendix 1 shows information on the groups that we think should qualify. Our ambition would be to ensure that prices can be reduced to pre-crisis levels for the most vulnerable households. NEA would want it to be funded in a progressive way and provided automatically to recipients. I've put some thoughts on standing charges below. Note that this is only reflective of the NEA view, and the others on the panel may think differently.
2.4. NEA also wishes to provide supplementary evidence on standing charges.
2.5. Ofgem has previously said that it would look to address high standing charges on energy bills. Unfortunately, they have decided not to act on this, and standing charges have actually continued to increase.
2.6. Come October, these charges will have soared by an average of more than 65% in four and a half years. This puts a terrible strain on many households in the middle of the worst drop in living standards in recent memory and an ongoing energy crisis.
2.7. People in North Wales or Merseyside will be paying over £80 more a year than Londoners. People who pay for their energy via a prepayment meter have been clobbered with much bigger increases of almost 80% over the same period.
2.8. Much of the rise has come about because Ofgem has decided to change the way in which we pay for the electricity network. Their targeted charging review made that decision, without fully considering the impact on low-income households using prepayment meters.
2.9. Last year Ofgem did look into this, with regards to potentially reducing some elements of the standing charge. They concluded that there would be added costs for high users if they reduced the standing charge (and therefore increased unit rates). The standing charge increased again subsequent to this in April this year. Ofgem has consistently made decisions to increase the standing charge, placing a higher and higher burden on low-income, low-usage households.
2.10. Ofgem has consistently said that prepayment households benefit from this approach, because they have a higher-than-average typical use. This is at odds with what the UK Government has told us about typical use for PPM households (which they say is actually lower than the average). Neither does it consider the pernicious impacts of standing charges that particularly impact prepay households - that during a self-disconnection, standing charges build up as a debt on the meter that needs to be repaid before energy can be accessed again. The higher the standing charge, the longer we will see households self-disconnected for.
Government Data Available
Other data that can be overlayed to provide effective support
Low-income and financially vulnerable
Low-income and financially vulnerable households are the least able to afford high prices, and more likely to ration their energy use.
Previously targeted for support through the £650 cost-of-living payment, but only using benefits data.
Universal credit and legacy means-tested benefits (captured by the Digital Economy Act).
Bereavement support payment.
Income data via HMRC (may require new powers).
On a debt repayment plan
Repaying small sums per week to a relatively large debt
Prepayment customers[i] (can split between prepay and smart)
Customers who self-disconnect
The Priority Services Register can indicate single people and lone parents.[ii]
Disabled/has a medical condition
Disabled households often need greater levels of warmth to manage their health condition, and spend more of their time at home, leading to higher energy need (and therefore costs).
Many also have higher electricity demand as a result of being dependent on powered medical equipment at home.
Previously targeted for support through the £150 cost-of-living payment, but only through benefits data.
NEA believes these benefits fall within the Digital Economy Act powers.
Data from the Priority Services Register can indicate households with a disability, with a medical condition or wider health-related conditions, including mental health.
Carers are often in financially difficult situations due to their reduced earning potential and diminished opportunities for higher level learning and training.
This has been further stretched by not receiving targeted support to date.
NEA believes Carer’s Allowance falls within the Digital Economy Act powers.
Low Energy Efficiency Homes
Low energy efficiency homes have much higher energy demands, leaving occupants more exposed to high energy prices. This often overlaps with households who also live on the lowest incomes.
Previously targeted for support through energy efficiency schemes and the Warm Home Discount.
Higher Cost Targeting (already used to deliver the Warm Home Discount from this winter).
Wider EPC data (not available for all households and may require new powers).
Usage data via smart meters.
Fuel poverty low income, low energy efficiency data (national and local – England only, and sometimes held by local authorities).
Homes heated electrically by technologies other than heat pumps often have higher energy costs as the unit price of electricity is so much higher than gas.
Those that use neither gas nor electricity for heating are particularly exposed – their heating fuels are not regulated.
Previously identified for support through the off-gas element of the EPG.
Suppliers will have identified these households as part of this winter’s £100 payment for off-gas households.
[i] Over half of prepayment customers earn less than £18,000/year. See CMA (2016) CMA Energy Market Investigation Appendix 9.6: Prepayment.
[ii] Low income single people and lone parents have been disproportionately impacted by the rising cost of essentials. See JRF (2022) New analysis shows Chancellor must act to avoid devastating damage to living standards of poorest families.