“Truly horrific” is how I’ve described the impending winter energy bill crisis to parliamentarians this past week – and I didn’t do that lightly.
It pains me there is no other way to describe what we see coming down the track for millions of people. People are deeply worried about their energy bills and the wider cost of living crisis, and many of them will never have experienced affordability issues like this before.
The causes are easy to identify. The surge in global gas prices was driven by the post-pandemic recovery as economies around the world ramped up their demand for energy. And it’s now been exacerbated by the frightening and heart-wrenching war in Ukraine, which has sent gas prices soaring beyond anything that could have been predicted.
Added to that, UK consumers have been uniquely unfortunate in having to pick up the tab for the failure of dozens of small scale, poorly run energy suppliers who played fast and loose with billpayers’ cash. Every household in the UK has seen £68 added to their energy bill for these regulatory failures in the retail market. Talk about adding insult to injury.
Ofgem’s April price cap increase is already painful for so many customers. I know this because we’ve set up a dedicated phone line for those struggling, and we received over 8,000 calls in just one week.
That’s 8,000 families, pensioners and hard-working people, anxious about keeping their heads above water with the cost of living crisis affecting the economy across the board: from the supermarket shelves to the petrol pumps, as well as energy bills.
Sadly, the way the price cap is calculated means April’s rise does not include the increases due to the Ukraine crisis – undoubtably meaning higher prices to come in the next price cap review, due in October. And as energy consumption increases in the autumn and winter, many, many customers are going to find the financial impact of heating their homes hugely difficult to manage.
It’s got to the stage where the size and scale of the problem is beyond what I think the energy industry can deal with. We need a massive shift in policy and approach, which consumer groups like National Energy Action and others agree with.
But if we can point to the cause of the problems, we can also come together to find solutions. I’m heartened the Prime Minister has said the Government is already looking at what can be done to support customers ahead of the winter, in addition to the measures they’ve already set out.
To get us through the crisis and soften the blow for the most vulnerable, the Government should be looking to expand on its approach, with a targeted deficit fund that would reduce prices for those most in need by £1000.
Over the next few years, once prices return to normal, those costs could then be recouped from a combination of government funding and support from the overall consumer base.
Longer term, with less volatility in the market, we need to find a better way of protecting the most vulnerable in our society. That’s why we’ve called for a social tariff to replace the current price cap, targeted to discount the price to people in poverty.
With the next Queen’s Speech coming in a few weeks’ time, Parliament has the chance to use an Energy Bill to consider how to introduce such a social tariff to permanently protect those who need it most.
What matters most today though is the almost unanimous recognition that something needs to be done. And it needs to be done soon to give customers some certainty and comfort for the difficult months ahead.