The existing “unfair and regressive” standing charge structure should be replaced with a sliding scale block tariff model that is more closely based on how much energy a household uses, MPs have urged.
In its first report since being set up during the summer, the House of Commons energy security and net zero (ESNZ) committee says the government, Ofgem and suppliers must take “urgent action” to help cash-strapped households as bills remain much higher than pre-crisis levels in the run-up to the winter.
The report, which follows a snap inquiry into how the government and energy firms can best prepare for the winter, highlights how standing charge costs are applied to customers’ bills, regardless of how much energy they use.
“The current standing structure is unfair and regressive and penalises those on lower incomes or who are actively reducing their energy usage,” it says.
This structure particularly affects pre-payment meter customers because standing charges build up even while customers are disconnected and must be repaid before energy can be accessed, it adds.
The report recommends that the government should engage with Ofgem to revise the standing charge model and replace it with a rising block tariff.
Also known as a consumption-based tariff, it works on the basis that the cost per unit of energy rises in line with the amount a household uses, thus providing an incentive to consume less.
Other recommended changes to standard charges include shifting operational costs into the main consumer bill.
The committee also urges the government and energy suppliers to consider implementing a form of social tariff, which should be accompanied with measures that enable energy efficiency improvements.
It suggests that energy companies must accelerate the rollout of smart meters, possibly by offering financial incentives to customers or tying energy efficiency support with installation of one of the devices.
Among a series of recommendations on how customer service can be improved, the committee says energy companies should be required ahead of this winter to provide a priority phoneline for trusted intermediaries, charities and consumer organisations so they can access support for their clients.
Ofgem and energy companies need to adopt a more proactive culture in improving industry consumer standards, it says.
The MPs say they are disappointed that Ofgem did not anticipate the need for significant improvements in consumer standards ahead of December, when they are due to be introduced, which is likely be too late to make a difference this winter.
Angus MacNeil MP, chair of the ESNZ committee, said: “You don’t pay a standing charge to buy petrol, you just pay for what you use. We also saw the wisdom in the need for a social tariff for those hardest hit and anyone with a modicum of empathy can see why.”
“The nights are now drawing in and many of our most vulnerable people will be haunted by harrowing memories of the relentless sacrifices they were forced into last year, just to keep their heads above water in the face of exorbitant energy costs. In fact one in four carry energy debts from last winter. With the challenge this winter threatening to be even worse, an announcement of support from the government is long overdue. The mechanisms to provide assistance are already in place – the government and energy firms must now get on and act to reassure struggling households that they are not being left to fend for themselves.
“While financial support will be vital, there also needs to be a drastic improvement in customer service and the empathy shown by energy companies to those who are going through tough times. If these firms don’t improve, Ofgem must be less backwards in coming forward and give them a good shake to ensure they are working in the best interests of their customers this winter.”
Simon Francis, coordinator of the End Fuel Poverty Coalition, welcomed the report’s “practical recommendations”, while expressing disappointment that it contains “nothing specific” to help households in energy debt.
“But the big elephant in the room is if the government will listen to the eminently sensible suggestions from MPs and take urgent action to keep people warm this winter,” he said.