Social tariffs and energy support worth over £2.1 billion is unclaimed by at least five million households, as highlighted in Policy in Practice’s latest report, Missing out: £19 billion of support goes unclaimed each year. These households could access lower costs social tariffs with their water, broadband and energy providers.
Yet, although summer is nearly upon us and families are beginning to turn their heating off, higher energy costs will continue to be reality for all households.
In the Spring Budget the government announced that the Energy Price Guarantee would remain at £2,500 until June. But without a replacement for the £400 Energy Bill Support Scheme, and the end of the Energy Price Guarantee, households should expect to see similar energy bills next winter.
This blog post discusses the best way to support households with higher energy bills.
Rising energy and water bills spark new calls for a social tariff
Despite the fall in energy prices in the next few months, energy bills have increased 180% in real terms since the pandemic. It’s likely that people will still continue to struggle to pay for their energy bills.
The Ofgem Price Cap rose from £1,277 in February 2022 to £4,279 in February 2023. This is a threefold increase. Household bills have been protected from this price cap rise by the Energy Price Guarantee which maintained average costs at £2,500 a year.
It’s important to highlight that energy bills will remain high and not fall below the pre-pandemic level any time soon.
From July 2023 the Ofgem price cap will be £2,074, which is less than the Energy Price Guarantee. However, this is still an 82% increase in average energy bills from July 2021.
Table 1: Energy price cap and support schemes from October 2022 to March 2024
|Oct - Dec 2022||Jan - Mar 2023||Apr - Jun 2023||Jul - Sep 2023||Oct - Dec 2023*||Jan - Mar 2024*|
|Energy Price Guarantee||£2,500||£2,500||£2,500||£0||£0||£0|
|Average bill after £400 Energy Support Scheme||£2,100||£2,100||£2,500||£0||£0||£0|
|Ofgem Price cap||£3,549||£4,279||£3,545||£2,074||£1,976||£2,044|
|Average bill (after all support)||£2,100||£2,100||£2,500||£2,074||£1,976||£2,044|
*Forecasts are based on Cornwall Insights Default tariff cap forecast
One social tariff covering all energy bills won’t help all families in fuel poverty
A single social tariff covering all energy bills is unrealistic because UK households heat their homes differently. Households consume a combination of gas, coal, oil, wind, solar, nuclear and others.
A single social tariff cannot accommodate the different prices for each energy type or the fluctuation of each market. The only solution would be to have a social tariff for energy, or gas, or both. But this solution would also present shortcomings.
A social tariff covering electricity only would exclude consumers who primarily use gas to heat their homes. Likewise, a tariff covering only electricity and gas would exclude 20% of rural areas in Scotland and many more households in Northern Ireland who mostly use oil to heat their homes.
Narrow rules for a social tariff may exclude those in fuel poverty
Another potential issue is how to define who will be eligible. Fair by Design, National Energy Action, Citizens Advice, Scope and many other charities have called for an energy social tariff where the discount is automatically applied for eligible households.
Unless customers share their financial information, energy suppliers do not know enough about the household income composition of their customers to decide who is eligible for a social tariff.
If it’s decided that eligibility should be passported for households on means-tested benefits, this solution would have to include some complex and expensive data-share agreement between the government and energy companies.
But attaching eligibility to means-tested benefits is not the best strategy because not all households on benefits are in fuel poverty. It is likely that there are families outside of the welfare system on a low income and in fuel poverty.
Determining social tariff eligibility through means-tested benefits cannot effectively tackle fuel poverty.
Investing in energy efficient homes is the most effective energy social tariff
The most effective way to tackle fuel poverty and climate change is by investing in renewables and ensuring that all UK homes meet the minimum EPC standard of C or above.
In previous blogs I’ve explored why the UK has struggled to deal with the current energy crisis and the four lessons that can help build the future energy system. The UK has one of the worst housing stocks in Europe. This means that every year billions of pounds are wasted as heat escapes through the roofs and walls of poorly insulated homes.
We have to create clear incentives and financial support to get homeowners and private and social landlords to invest in energy efficiency improvements. An issue neglected by the UK government until recently.
The best way to support low income households is through the welfare system
Working-age benefits have been seriously reduced in real terms since 2010, and are at the lowest levels in 30 years. Policies like the two-child limit and the benefit cap have created enormous challenges for families that rely on the social security system.
People on benefits cannot afford energy bills because their income is not enough to meet their most basic needs.
Benefits should be increased to reflect the real cost of living. An analysis from the food bank charity Trussell Trust found that current benefit rates pay slightly above the threshold for destitution, where people cannot afford essentials to keep warm and eat.
For claimants under 25, their benefit payments are below the level of destitution. The Joseph Rowntree Foundation and the Trussell Trust found that a single person needs £120 a week (after housing costs) whilst a couple needs £200. This means that Universal Credit claimants are over £200 short every month.
Benefit levels should be set in line with the current cost of living to ensure that people can meet their basic needs.
What can energy companies do to help customers with higher energy bills?
Energy companies can support struggling households by:
- Ensuring that the collection process is fair
- Making sure that vulnerable households are on their Priority Services Register, and providing income maximisation advice.
- Energy companies ought to check the benefit entitlement of their clients as well. Energy companies can use our Better Off Calculator to identify vulnerable households and any unclaimed benefits.
Over 200 organisations and companies use the Better Off Calculator to check their customers’ eligibility for benefits and social tariffs.
Case Study: Anglian Water uses data to improve the customer journey and increase the take up of social tariffs
We have built an Apply Once process via the Better Off Calculator for Anglian Water, available via GOV.UK. This newly improved application journey allows a customer to seamlessly apply directly to Anglian Water’s social tariff scheme at the same time as completing a benefits check.
We use analysis to route financially vulnerable customers to our Extra Care support team. Our bespoke Benefits Calculator, developed with Policy in Practice, checks whether customers are claiming all the benefits their household is entitled to and assesses them for discounted tariffs.
Over the past year, we’ve been able to signpost customers to more than £2.6 million of potential unclaimed benefits, and a total £8.6 million since 2020. In some cases, we know this assessment has helped customer access more than £3,000 in benefits which they didn’t realise they were entitled to.
Spencer Hough, Head of Billing and Customer Services, Anglian Water
We are also working with other companies in different sectors to integrate our award-winning Better Off Calculator into their customer journeys to enable the seamless check for eligibility for Universal Credit, social tariffs and other support.
Watch our on-demand webinar, How low income families can benefit from social tariff, with guest speakers
What can councils do to help support residents with higher energy bills?
Councils can identify residents living in fuel-inefficient homes using data analytics and contact them on the benefits they are missing out on. Policy in Practice built the Low Income Family Tracker (LIFT) to identify people in danger of financial crisis and help them maximise income by taking up the benefits they are eligible for. LIFT does this by combining administrative datasets with Policy in Practice’s expert policy rules engine and visualising the results.
One of the datasets used by LIFT is Energy Performance Certificate ratings (EPC). This dataset, combined with the council’s own administrative datasets, allows a council to identify households living in individual energy-inefficient properties so they can target support directly to them.
What practical steps can you take if you’re struggling with your energy bills?
£19 billion of benefits and support is unclaimed and millions of households are missing out.
A recent report published by Policy in Practice found that median-income households with children, low savings and renting privately are likely to be eligible for Universal Credit.
Even if you’re eligible for just a small Universal Credit payment it is important to apply as a successful application can be a gateway to other support such as £150 off your energy bill through the Warm Homes Discount, cheaper broadband and the ‘Help to Save Scheme’.