The government has proposed to extend the Warm Home Discount by 12 months to April 2022.
The Department for Business, Energy and Industrial Strategy (BEIS) said it intends to keep the major elements of the scheme unaltered but introduce a per customer cap on the amount of unpaid debt that suppliers can write off using the support payments.
In a consultation on the proposals, BEIS said it planned to increase the yearly budget of the scheme in line with inflation to £357 million but keep the value of the payments level at £140 “as the eligible pool for the rebate is likely to be larger as a result of the pandemic.”
It said it will also maintain the participation threshold for the core group of recipients at 150,000 customers as there is insufficient time for smaller suppliers to adjust their tariffs but keep it under review for future periods.
The overall cap on the amount of unpaid debt that suppliers can write off under industry initiatives will likewise be maintained at £6 million. However, BEIS said it has seen evidence that some suppliers are using the scheme to write-off historic or bad debt, including over £15,000 per customer in some instances.
“The policy intention of debt write-off under industry initiatives is to help customers out of fuel poverty, where other mechanisms are not available,” the consultation stated. “This is linked to the requirement under energy suppliers’ licence conditions to ascertain a customer’s ability to pay and have affordable repayment plans. It is not meant to help energy suppliers writing-off bad debt or balancing their books.”
The department has therefore proposed to introduce an additional cap of £2,000 on the amount of unpaid debt that suppliers can write off for each customer: “This proposal will help to reduce the level of historic debt which is written off under the scheme, whilst maintaining simple administration for debt write-off.
“Those customers who have over £2,000 of energy debt are likely to require holistic assistance to address more complex financial circumstances and should be addressed under energy suppliers’ licence conditions.”
BEIS said it also wants to introduce a requirement on failing suppliers to provide information on their unfulfilled spending obligations to assist suppliers of last resort in honouring them.
The decision to extend the scheme was warmly welcomed by National Energy Action (NEA), which described it as a “winter lifeline” for millions of Britain’s poorest pensioners.
Paul Smith, director of policy and research at the charity, said: “As incomes fall and more people are needing to spend longer at home using energy, millions of the poorest energy consumers are having to choose between heating their home adequately or falling into debt.
“The Warm Home Discount scheme ensures the most vulnerable pensioners receive energy rebates automatically and are better able to afford to keep their homes adequately warm over winter. The year extension is welcome and it’s encouraging that the UK government is increasingly recognising the value of this winter lifeline for millions of the poorest consumers across Great Britain”.
However, Smith also called for longer-term clarity over the future of the scheme and said more needs to be done to make eligible customers aware of the support payments: “The proposals set out today do not help up to two million British households who miss out on the energy rebates each year, despite them being eligible for support and paying for the cost of the policy through their energy bills.
“The upcoming spending review must expand the scheme and act on current powers which allow government to ensure that all those eligible for the WHD rebate actually receive it without reducing payments for current low-income pensioner recipients.”