Low-income and vulnerable energy customers should automatically be signed up to a new below-cost social tariff, National Energy Action will argue in a new report due to be published next week.
The key points of the fuel poverty charity’s study were outlined at a House of Commons meeting earlier this week by its director of policy and advocacy Peter Smith.
He told the meeting, which was organised by the All-Party Parliamentary Group on energy costs, that the mooted social tariff should “deliberately” aim to “significantly” undercut energy costs to recognise the “huge affordability pressures” low-income households face.
Rather than relying on cross-subsidy from other customers, Smith said the report will recommend that the government should fund the social tariff, like it has the Treasury’s recently announced energy bills rebate scheme.
He told the meeting that the social tariff, which has been drawn up with fellow poverty campaigners Fair by Design, should be available to all eligible customers so that those with smaller suppliers do not miss out.
And instead of relying on customers applying for the tariff, it is important that all those eligible should be ‘auto enrolled’, he said, adding assistance could be targeted by sharing data using existing powers. Under auto enrolment, which has been used most extensively in the UK to encourage pension saving, individuals would have to opt out rather than making an active choice to sign up.
Smith also said the proposed new arrangement for low-income customers should run in tandem with existing protections provided by the price cap on default tariffs and the Warm Homes Discount.
Laura Sandys, ex-government adviser on energy, told the same meeting that splitting out renewable generation from the wider wholesale power market could cut electricity bills by 15 to 25%.
She said the decoupling of renewables from the wholesale market, which business and energy secretary Kwasi Kwarteng is exploring, must be looked at “very, very quickly”.
Sandys said it is “absolutely extraordinary” that prices for low-carbon electricity, which makes up an increasing share of the UK’s generation mix, remain tied to the marginal price of gas.
She also called for the introduction of block tariffs, like those used in Dubai, which would be tailored to a households’ overall energy consumption.
These create a sliding scale for electricity prices with households in the top usage ‘block’ paying the most per unit, which then progressively reduces in line with consumption.
Arguing that lower income households tend to use less energy than their more well-heeled counterparts, the former Conservative MP said it offered “a targeted way” of reducing the former group’s costs , while making “excessive” users pay a premium.
“That seems to be pretty progressive,” she said, comparing it to what she described as the “very indiscriminate” price cap, which offers the same protection to a household on a low income and one with “three Teslas and a swimming pool”.
Sandys said that the sliding scale tariff would also offer customers an incentive to get into a lower block by installing energy efficiency measures.