Expanding the existing Energy Bills Support Scheme announced by former chancellor Rishi Sunak “must be the priority” for government, an industry expert has argued.
Mark Jobson, former strategy director at British Gas and now a principal in the energy utilities practice at the consultancy Kearny, was speaking ahead of next week’s announcement by Ofgem of the next price cap increase in October.
Sunak revealed in May that the government was doubling the value of its proposed discount on domestic electricity bills in October to £400, whilst also scrapping the requirement that it be recovered from future energy bills over the following five years. He also announced one-off payments of £650 to low-income households on certain benefits, £300 to some pensioners and £150 to people on disability benefits.
Along with the £150 council tax rebate provided in April, Sunak said low-income households would receive a total of at least £1,200, fully covering the price cap increase to £2,800 expected by Ofgem at the time. However, since then forecasts have increased significantly, with industry analysts recently predicting the price cap to rise to almost £3,600 in October and then nearly £4,300 in January.
Jobson told Utility Week: “We have short, medium and longer term horizons to solve for, but what matters now is the hit energy prices are having on people’s wallets and the cost of living crisis we are seeing.
“Solving for this with a measure that is quick to implement and ideally doesn’t miss consumers, even if that means you potentially spread the benefits more widely and less targeted than you’d like, must be the priority.”
Jobson said the main benefit of extending the existing support scheme, rather than implementing new mechanisms as proposed by some, is the government has already “won political momentum” and “the wheels are already in motion” in terms of how it will be implemented.
He further explained: “The narrative for an updated level of support is easy to understand – £400 was the right level of support at the time, but since then the outlook for bills has continued to rise so the level of support needs to rise too.
“It’s a very feasible measure, both in terms of implementing it and the political support for it.”
Jobson added that extending the scheme will help consumers deal with the immediate impact of the crisis, while allowing time to focus on tackling the longer-term issues.
He said: “Taking the immediate issue of affordability off the table gives us the benefit of time to review the energy market and economic situation holistically, and take a more deliberate set of considerations around future market design, how we make energy affordable, improve energy security and continue to support decarbonisation over the medium to longer term.”
Other solutions to help consumers that have been discussed recently include removing VAT from energy bills, as well as removing green levies.
Although VAT reduction is “not a massive needle-mover,” Jobson believes it is something the government can “very easily enact”, especially following the UK’s withdrawal from the EU.
“It feels like a low-regret move and it’s hard to justify applying VAT on energy bills with one hand when you are then handing out support payments with the other,” he added.
However, on removing green levies, he cautioned: “The concerning thing here for the industry is anything that potentially removes funding or creates uncertainty and volatility in the level and mechanisms for how support is provided for energy efficiency improvements through ECO, or for renewable generation.
“These are both areas that will ultimately reduce reliance on gas for power and heat, providing protection against the kind of price shock we are experiencing now.”
Speaking at a hustings event hosted by the Conservative Environment Network on Wednesday (17 August), environment minister Lord Goldsmith gave assurances that Liz Truss’ commitment to scrap green levies on energy bills would not lead to cuts to home insulation investment if she won the Tory leadership race.
Supporting customers through this winter and identifying emerging vulnerabilities are among the key themes at the Utility Week Forum, which will take place in London on 8-9 November. Find out more here.