A tiered Warm Home Discount should be introduced to bring down energy costs for low income consumers, Citizens Advice has urged.
It is one of several recommendations, made in the charity’s latest report, which it believes will be critical to ensure all consumers benefit from a net zero electricity system.
Citizens Advice believes that a tiered Warm Home Discount could support more people on low incomes and be tailored to support their energy needs.
Tiering, it argues, could provide support of up to a third of a typical bill (currently around £560) to low income households with the highest energy costs. It avoids steep thresholds for eligibility by providing a lower level of support to those on low incomes with lower energy costs.
Such support could be funded by improving the targeting of current taxpayer spending – potentially supported by a contribution from bill payers, where this can be offset by savings.
Currently, the Warm Home Discount works by matching households on eligible means tested benefits, assessing their energy needs based on the characteristics of their house, and providing support for those above a single ‘high cost’ threshold.
A tiered approach would use the same mechanism but have multiple thresholds, so that those above the first threshold get a higher payment, with decreasing levels of support for those with lower energy needs.
It comes as a recent report by cross-party think tank the Social Market Foundation (SMF) also proposed the introduction of a tiered Warm Home Discount.
The SMF said its proposals mean that an additional 1.4 million households could be supported by the measure, bringing the total to 3.9 million.
The think tank admitted its proposals will bring the estimated annual cost of the programme to £1.4 billion (from £374 million). It recommends phasing out or reducing the Winter Fuel Payment benefit which costs £2 billion and is paid out to all pensioners. A tiered Warm Home Discount, it said, could be funded from this.
“Under SMF’s model, the expanded WHD will also be more generous, as it will no longer be a flat rate…and range from £550 – £250, if aiming for a 15% reduction in energy bills to all households that are either receiving pension credit or means-tested benefits,” it explained.
Elsewhere, Citizens Advice’s report also urges the government to develop “an ambitious new smart meter framework” that will tackle barriers to uptake once the current rollout ends in 2025.
It warned that the transition to market-wide half hourly settlement (MHHS) and possible reforms to default tariffs may increase concerns around smart meters and data privacy and “create space for misinformation” about how the devices may be used.
“As it stands, there is no framework for consumers accessing smart meters beyond 2025. Government must develop an ambitious policy framework which tackles the barriers to uptake and ensures that as many people as possible can access smart meters when MHHS is introduced,” it said.
Responding to the recommendations, a Department for Energy Security and Net Zero spokesperson said: “The government is spending £108 billion between 2022 and 2025 to support families with their bills – an average of £3,800 per household.
“In Winter 2022/23, we increased the Warm Home Discount payment to £150 to support more households with their energy bills.
“The government continues to support those most in need with up to £900 in Cost of Living Payments, and an extra £150 to those on eligible disability benefits.”