Millions at risk if household energy support package is cut in April, Utilita warns
Millions of Brits are at risk of being unable to pay their energy bills beyond April, unless the government maintains support packages for households at current levels, Utilita Energy has warned.
The firm’s chairman, Derek Lickorish, has written to Business Secretary Grant Shapps, calling for the subsidies in the Energy Price Guarantee to be sustained for another 12 months in order to keep average energy bills sustained at £2,500 per year.
In the letter, seen by City A.M., Lickorish argued the extension would both provide “insulation from the short-term price-shock” expected between after support is reduced in April.
If support package is not maintained, millions of households would be left “even more financially vulnerable,” he wrote.
Extending the scheme would “allow time for government and industry to work closely together to design and implement better targeted support for those who need it most” next winter, he added.
After April, the Energy Price Guarantee will instead subsidise bills at a rate £3,000 per year, while the price cap is expected to clock in at £3,208 per year, according to the latest forecasts from Cornwall Insight.
This means households will have no choice but to swallow a £500 per year hike in energy bills, while the £400 discount in the Energy Bills Support Scheme is also expected to conclude, compounding difficulties for households.
While the price cap is expected to drop to around £2,200 per year next winter, this is still nearly double energy prices prior to the industry crisis which saw 30 suppliers collapse and Russia’s invasion of Ukraine last year.
Lickorish also called for the Warm Home Discount to be hiked from its current discount of £150 per year.
“By using the Warm Home Discount delivery channel, support is tightly targeted – as opposed to the universal approach of the Energy Bills Support Scheme scheme and therefore proves for a more efficient use of government funds,” he said in the letter.
The Utilita chairman also suggested “further thought should be given” towards bringing in new rules for debt repayment, so that debts placed on prepayment meters are not recovered during the winter months when demand is at peak.
The government has been approached for comment over Utilita’s letter.
Utilita proposes solutions as Ofgem scrutinises role of prepayment meters
The supplier’s proposals follow an industry meeting with a dozen other industry players and charities – with the sector under increasing pressure to protect vulnerable households.
It revealed there was “unanimous” agreement that prepayment meters were not the issue, and that “affordability is the main problem and will be for some time to come.”
Commenting on the value of prepayment meters, Lickorish said: “Millions of households already benefit from smart prepay and millions more currently struggling on pay on receipt of bill – the most expensive tariff – could be far better served by switching to prepay, avoiding a downward spiral into debt and avoid the detrimental effect of self-rationing.”
Utilita’s business model encourages people to save money through using less energy, offering smart prepayment meters to its 850,000 customers.
However, there is growing scrutiny on the use of prepayment meters in the industry – particularly if forced on customers grappling with debts and record energy bills.
Consumer charity Citizens Advice has called for the practice of forced prepayment meters to be banned, while Shapps himself wrote to energy suppliers last weekend telling them they must stop forcing financially vulnerable households to switch to prepayment meters.
Ofgem chief Jonathan Brearley meanwhile, has confirmed the regular will review self-disconnections, remote switching and forced installations for prepayment meters and whether the process for such installations includes the necessary “checks and balances.”
The watchdog is set to attend a meeting with government ministers to discuss the future of prepayment meters, alongside the UK’s domestic energy firms and consumer charity Citizens Advice.