High income households could pay more for electricity, Ofgem says
High-earning households could be forced to front more of the cost for running and upgrading the UK’s energy network, Ofgem has said.
Jonathan Brearley, the boss of the energy regulator, told a briefing on Tuesday that wealthier households may have to pay more via the standing charge on their energy bills, while those out of work or on lower pay would receive a discount.
“Over the next few years, we do expect variable costs to come down, but the proportion of costs that are fixed will rise, which, if unchecked, could exacerbate inequalities that we see today,” Brearley said, speaking at an Ofgem event.
“So, in the summer, we are launching a wide-ranging examination of how we best allocate costs within the energy system from first principles. We will look at the best way to share out costs, including the incentives they put on consumers.”
It comes as the energy sector and government wrestle with rising electricity bills while battling to keep pace in the transition to renewable technologies.
“It’s a question that we need to answer as we go through this transition and as we think hard about getting to a place we want to get to,” Brearley added.
Britain’s energy price cap rose to £1,849 per year this month, compared with £1,568 in July 2024, when Labour won the general election.
Bills have also soared in recent years on the back of Russia’s invasion of Ukraine and the Covid-19 pandemic.
The cost of maintaining wires and cables to deliver gas and electricity to homes is currently levied through fixed daily standing charges, regardless of the level of energy consumption.
This has a disproportionate effect on vulnerable consumers who often use higher amounts of energy.