Social tariff could cut £300 from fuel poor’s energy bills

A social tariff could cut more than £330 annually from the bills of the most vulnerable energy customers, new research suggests.

Industry experts have analysed two potential social tariff models and found that implementing them would be relatively low cost for the government.

The research, conducted by Cornwall Insight, found that offering discounted energy tariffs to low-income households by either removing the standing charge or offering a 20% discount on the price cap unit rate could save consumers £296.08 and £332.62 per year, respectively.

Cornwall Insight’s data shows that providing support via social tariffs would cost the government approximately £1.3-£1.4 billion, which is less than 4% of its £37 billion expenditure on the Energy Price Guarantee and the Energy Bill Support Scheme over the past year.

It further highlights recent research by telecommunications regulator Ofcom which indicates that up to 4.3 million households could qualify for a social tariff on broadband, with similar numbers thought able to benefit from energy social tariffs.

Craig Lowrey, principal consultant at Cornwall Insight, said: “With the price cap struggling to keep bills affordable going into winter, and energy costs expected to remain above historical highs for the foreseeable future, the idea of energy social tariffs is gaining momentum. Many believe such support could be the much-needed lifeline for millions of people who are struggling to pay their energy bills, and their introduction would bring the energy sector into line with both its water and telecommunications counterparts.

“While the government previously said it was open to discussion on support including social tariffs, progress has been disappointingly slow. Although there are already focused support measures in place for particularly vulnerable households, the harsh reality is that the price cap alone won’t shield many households from fuel poverty. Serious consideration of how to help the most vulnerable pay their energy bills needs to happen as soon as possible.”

Giving evidence to the House of Commons select committee on energy security and net zero recently, Ofgem chief executive Jonathan Brearley estimated that up to 30% of households could be eligible for a social tariff if it was put in place.

Through our Action on Bills campaign, Utility Week has long been calling for targeted support, such as a social tariff, for the most vulnerable energy customers.

There is growing concern however that winter is fast approaching and the government is yet to announce any new targeted support.

Last week Wera Hobhouse, energy and climate change spokesperson for the Liberal Democrats, accused the government of abandoning vulnerable energy customers.

Speaking to Utility Week Hobhouse voiced her concerns.

“Even continuing the energy support scheme from the previous year is ultimately an interim measure whereas a social tariff really embeds the idea that vulnerable people need to have help with their energy bills properly over the long term,” she said.