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Fuel Bank Foundation Energy Price Cap Response

May 25, 2022

Fuel Bank Foundation Energy Price Cap Response Featured Image

Jonathan Brearley, chief executive of energy regulator Ofgem, announced yesterday (Tuesday 24th May) that the energy price cap is expected to rise by £830 to £2,800 in October, pushing fuel bills to record levels and forcing millions of families into fuel poverty.

In response, Matthew Cole, head of Fuel Bank Foundation, said:

“We have significant concerns about the impact of energy costs of this level, without any further mitigation on families who are already struggling with the cost-of-living crisis.

“To date, more than 550,000 people have been supported by Fuel Bank Foundation with crisis prepayment meter top ups to avoid them having to self-disconnect and live without heat, light, and power.

This has gone far beyond being a problem. This is a full-blown crisis and should be acknowledged as such. Without immediate action, people will die this winter, or their health and well-being will be severely impacted from living in a cold or under-heated home.

“People who pay for energy as they use will be hit hardest as they are more susceptible to rising energy costs because they are less likely to have a credit or buffer to tide them over the heating season and colder winter months when costs increase. There are currently around four million households in Great Britain with a prepayment meter.

“A £2,800 energy annual energy charge means that an average prepayment customer will need to top up their meter by £391 per month.  For many, this is unsustainable.

In addition to people with prepayment meters, those who use heating oil – currently around 1.5 million homes – are also being hit hard in the pocket. The Fuel Bank Oil Tracker has highlighted that the cost to fill an oil tank to heat a home has increased by 92% year-on-year, with the average oil tank top up costing more than £1,000. 

“The Household Support Fund provides additional funding to local and national governments to support families through the cost-of-living crisis, but this is not always ringfenced for energy and faces many competing demands for use, and inconsistency in support delivered.

“Energy suppliers are obliged to ensure that pre-payment is safe and practicable for customers, but our client insight highlights that life is becoming increasingly precarious for those with limited means, who struggle to maintain weekly top ups.  Families who rely on heating oil are not provided with any regulatory or price protection.”

To help ease the financial burden on families, Fuel Bank Foundation is calling for additional support from Government and energy suppliers.

  1. Government should provide additional financial support to low-income families to reduce the impact of the average £1,491 year-on-year increase (from £1,309 in Oct 2021 to £2,800 in Oct 2022) that households now face. Support should be tapered so those who are at most risk – such as those eligible for Warm Home Discount – receive maximum support, and as a minimum all recipients of Universal Credit (or related legacy benefits) should be provided with some additional protection.
  2. Financial support should be staged to arrive at the times when it will be most impactful – and should be ring-fenced for energy only.
  3. VAT on energy should not be reduced (as this will benefit high-consumers, who tend to be the wealthiest, the most). Instead, the receipts should be used to part-fund crisis support for lower income families.
  4. Household Support Fund funding must continue but part should be ring-fenced for energy to ensure a further safety net remains for those who require additional fuel crisis support.
  5. Government to investigate how additional support and protection can be provided to those households who rely on unregulated oil, LPG and coal to keep warm.
  6. Energy suppliers need to ensure that pre-payment is safe and practicable for all existing customers prior to the installation of a pre-payment meter and when a new customer joins with an exisiting pre-payment meter, given the current cost pressures that households are facing and the acute risk of self-disconnection this winter.  Suppliers must take action or provide suitable mitigation as appropriate.