MPs decry ‘outdated’ energy bill support for vulnerable homes
Image credit: PA Media
Members of the parliamentary energy committee have criticised Ofgem for the regulator's “negligent” handling of the rise in energy costs.
A "massive" insulation drive needs to be launched urgently, in order to bring down the cost of energy bills and support low-income households, said the UK Business, Energy and Industrial Strategy Committee.
MPs that form part of this select committee have described the government's current energy bill support scheme as "outdated" and accused energy regulator Ofgem of being “negligent” in its response to the rise in energy prices.
“Once again, the energy crisis is racing ahead of the government,” said Darren Jones, the chair of the committee. “To prevent millions from dropping into unmanageable debt, it’s imperative that the support package is updated and implemented before October, when the squeeze will become a full-on throttling of household finances and further tip the economy towards recession.”
As part of their suggestions, MPs asked ministers to consider abandoning the energy price cap in favour of discounted energy bills for the most vulnerable and rules that cap the difference between a supplier’s cheapest and most expensive deal.
The committee also criticised the plan announced by former chancellor Rishi Sunak to address the rising costs. The plan was welcomed by the industry at the time, as it promised to allocate £400 energy bill discounts to all households; £650 to another eight million low-income households; £150 for those on disability benefits, and £300 for pensioners.
However, several MPs have now come forth as being against this package, stressing that it was designed at a time when the energy price cap was forecast to rise to around £2,800 in October. The latest forecasts now set the next price cap at £3,244, raising concerns about people's ability to afford to heat their homes come winter.
“We were told by a number of witnesses: ‘If you think things are bad now, you’ve not seen anything yet’,” Jones said. “This winter is going to be extremely difficult for family finances and it’s therefore critical that public funds are better targeted to those who need it the most.”
The committee also accused Ofgem of “incompetence over many years” which allowed unprepared organisations to start new energy companies. This has resulted in 30 energy suppliers failing within the past six months, increasing energy bills by £94, MPs said.
“Negligent energy regulator Ofgem enabled now bankrupt energy firms and inexperienced CEOs to increase energy bills further,” the committee said.
In response, Ofgem said the massive gas price spike “would have resulted in market exits under almost any regulatory system”, but admitted its previous regime was “not robust enough” and this had contributed to some suppliers failing.
“No regulator can, or should, guarantee companies will not fail in a competitive market, but we are working hard to reform the entire market as well as closely scrutinising and holding individual energy suppliers to account, to further strengthen the regulatory regime,” it said.
The Department for Business, Energy and Industrial Strategy (BEIS) said: “No national government can control global inflationary pressures. However, we have introduced an extraordinary package of support to help households.”
Instead of reacting to immediate problems, MPs called upon the government to develop a long-term plan that will ensure future energy security, in light of climate change and rising temperatures, as well as the possible continuation of the war in Ukraine.
Currently, the UK has "the worst insulated homes in Europe", the committee said, which results in residents needing to spend large amounts of money and energy in order to protect themselves from extreme temperatures, both hot and cold.
A fully funded national campaign to upgrade and insulate homes “street by street, community by community” is needed, the committee said. Such a strategy would not only reduce energy bills, but also help the country reach its climate change targets.
“If the government is really taking this energy crisis and the country’s net zero targets seriously, it will come forward with a bold, fully funded, national home insulation programme before the end of the year,” Jones said.
Last week, the UK paid the highest price on record for electricity in London as the capital narrowly avoided a power blackout, it has emerged. On Wednesday July 20, National Grid’s Electricity System Operator (ESO) was forced to pay £9,724.54 per megawatt hour to Belgium - more than 5,000 per cent higher than the typical price - to address the energy demands that accompanied an historic heatwave.
Only by making this costly payment was ESO able to prevent a blackout in south-east London.
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