Applying the Energy Price Guarantee onto unit rates is welcome news for pre-payment meter (PPM) customers, an industry chief has said.
Last week prime minister Liz Truss unveiled a package of measures, part of the government’s response to the energy crisis, in which she confirmed bills will be capped at £2,500 a year for average households over the next two years.
The new guarantee limits the amount a customer can be charged per unit of gas or electricity, meaning the exact bill amount will continue to be influenced by how much energy is consumed.
PPM customers in Great Britain will see the guarantee applied to the rate they pay for each unit of energy, meaning the money put on the meter will last longer than would otherwise have been the case this winter.
BEIS has confirmed however that, as is the case with the price cap, there will continue to be a “small difference” between the unit cost for a PPM customer and other bill payers.
Derek Lickorish, non-executive chairman of PPM specialist supplier Utilita, told Utility Week his company “warmly welcomed” the plans.
“We’ve been clear, the whole industry has been clear, that that’s how it has to be. Otherwise, it’s manifestly too difficult and manifestly confusing, most importantly, for the customer,” he added.
Lickorish, who is former chairman of the government’s Fuel Poverty Advisory Group, congratulated the prime minister and said she had been “immensely bold”.
He continued: “She’s had to be brave. And I think that whilst we’ve still got some bits and pieces to work on, there will always be some gaps, we’ve got to get this operational and it may not be perfect.
“We have to do it by 1 October, but from my listening to all those involved, there is nobody who isn’t giving this 110% to make sure it’s delivered on time. And the collaboration between the suppliers and the government on this has been excellent.”
For dual fuel customers on standard variable tariffs paying by direct debit, the average unit price will be limited to 34p/kWh for electricity and 10.3p/kWh for gas, inclusive of VAT, from 1 October.
Customers on a fixed tariff at a higher rate caused by recent energy price rises, will see unit prices reduced by 17p/kWh for electricity and 4.2p/kWh for gas.
Utility Week contacted the Department for Business, Energy and Industrial Strategy (BEIS) to ask whether customers on cheaper fixed price deals will also have their unit rates lowered, but BEIS was unable to offer a response to this.
Ahead of the government’s announcement last week concerns were raised by several industry experts about what they perceived would be a lack of an incentive for customers to reduce consumption if their energy costs were capped.
Asked for his thoughts on this, Lickorish said: “I think the trouble is, we have too many sweeping statements and we have those involved in the debate who like to polarise it. The reality is that for the vast majority of our customers, they are already constrained on their consumption, they are constrained on the amount of money that they have, with all the other cost of living increases they’re not profligate with energy at all. And in fact, some of them don’t use enough now.
“So we have still got a significant issue. And the notion that customers who are on the basic minimum wage, who don’t pay tax, and the millions of pensioners that don’t have top ups to their pension…they don’t have the heating on all day, they only have the heating on for a couple of hours so they’re already constrained.
“Whilst I understand the intellectual point that people are making about this, for the vast majority, they’re not profligate with energy.”
Lickorish added that looking ahead, he believed the sector still has a “huge mountain to climb” to prevent another crisis reoccurring.
“For me, the sooner we get to a scenario where the marginal cost of energy is very low, the better. That can certainly be achieved with renewable energy. But we have to tackle, at the strategic level, the issue of intermittency. That for me is still missing, it’s still missing in the dialogue that’s taking place today. We need energy storage on a gargantuan scale.”
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