British Gas, E.ON, EDF and Scottish Power call for a Social Tariff to help customers with soaring gas bills and rising energy price cap
The energy industry looks set to be on a collision course as the largest energy suppliers in the UK disagree on whether the government should legislate to introduce a social tariff to help the most vulnerable energy customers with their energy bills this winter.
Why the need for a social tariff?
Companies such as British Gas, E.ON, EDF Energy and Scottish Power have all said that with wholesale gas prices continue to soar and with Ofgem’s recent announcement that it will likely be hiking the energy price cap by an extra £150 many of their most vulnerable customers will struggle to pay their energy bills.
According to some consumer groups, the double whammy of wholesale prices and the record high price cap rise could see an extra 500,000 households slide into fuel poverty this winter, adding to the 3 million already in it.
The suppliers argue that such a social tariff should build on the current Warm Homes Discount scheme which offers eligible households a discount with their energy bills each winter.
They also want the tariff to be funded by the industry and want every energy supplier to contribute to it depending on the number of customers they have. A discount payment would then be returned to the suppliers depending on how many customers they have in fuel poverty.
Also read: Energy Price Cap could rise £150 hints Ofgem chief
Opposition to the social tariff
Energy suppliers that have more customers in fuel poverty on their books have lashed out at the idea of a social tariff as it would impose extra costs onto their business.
After hearing of the plans Octopus Energy immediately announced that it would oppose a social tariff and other energy suppliers look likely to take a similar stance. Bulb Energy said that it will need to see a detailed plan before it could consider supporting such a tariff and Ovo Energy has said that currently, it is on the fence.
Many energy suppliers have taken a financial hit already as a result of the Covid-19 pandemic so the introduction of a social tariff could have even greater negative impacts on their balance sheets.
Also read: Worries grow over possible wave of small energy supplier failures in October
What does this mean for energy suppliers?
Getting a social tariff into effect is unlikely to happen anytime soon as the government will have to legislate such a move.
The energy regulator, Ofgem however has told energy suppliers that they must do all they can to support their most vulnerable customers.
“The price cap rise is difficult news for all households. Therefore, my message to energy companies is clear- you need to provide all available help and support to customers who are struggling as a result of this price change,” said Jonathan Brearley, the chief executive of Ofgem.
Also read: Add your Customers to the Priority Service Register with Dyball’s CRM
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