Energy bills being more than £1,700 a year is not normal – we need government intervention

Energy bills are heading for a third successive rise in April – exactly how much they’ll be increasing will be announced by Ofgem on Tuesday (25 February). But what is clear is that low-income households are in desperate need of more support with their energy bills.

What Ofgem will be announcing is how much the energy price cap will rise from April. The price cap is the mechanism used by Ofgem to limit the amount that can be charged by suppliers (though some would argue that it is a high limit).

The cap is currently set at £1,738 a year for a ‘typical’ household – if a household uses more than what Ofgem calculates as ‘typical’, then they will pay more than this. There are currently more than six million households in the UK in fuel poverty, spending more than 10% of their income on keeping their homes warm.

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We are still some way off the extraordinary peak of the £2,500 a year bills and 7.5 million households in fuel poverty from April 2023, but make no mistake, energy bills being more than £1,700 a year is not normal. Before the energy crisis began in October 2021, a typical energy bill was £1,138. The shocking increases since then, coupled with the cost of living crisis and reduced government support, have stretched thin all remaining slack in the budgets of low-income households.

The impacts of more than three years of sustained high energy bills are stark. We regularly see households who are severely rationing their heating – with serious ramifications for health and mental wellbeing – and going without essentials. Emma is one such client we’ve helped. As a result of the high energy prices, Emma rationed her heating, prioritising keeping her home warm when her daughter or grandchildren visited. When they were not there, she said, ‘I tend to try and keep it off, sort of thing, just trying to cut back as much as possible.’ Emma also relied on food banks.

National Energy Action is calling for government intervention in three key areas. In the short term, there needs to be deeper, additional targeted energy bill support through a social tariff or an expanded warm home discount. The warm home discount currently provides £150 over winter to some households. In the past five years, annual costs have risen by hundreds, while the discount has risen by £10. It currently goes to three million households, but we calculate that double that number are in fuel poverty. Compounding this is the change to the winter fuel payment to make it means-tested. At a time when there needs to be more support for vulnerable households, there is less.

Secondly, the growing disaster of debt needs addressing. Total energy debt is at record levels, approaching £4bn, and rising. This is obviously bad for individuals, causing or exacerbating mental health issues and can lead to energy rationing. It’s also bad for the industry – debt is a burden on supplier finances – and is bad for energy consumers in general because the cost to service this debt is added to all our bills. People in debt can spend less money, so it’s also bad for the economy. To address the growing debt disaster, Ofgem and the government need to co-operate on a help-to-repay scheme to support households out of debt.

Finally, the government’s Warm Homes Plan needs to be a game changer that will actually turn cold properties into warm homes for the poorest households. HM Treasury must invest more into energy efficiency – if the government doesn’t commit to funding in the spending review, the UK won’t make the progress required to meet our statutory 2030 Fuel Poverty Target. The Energy Company Obligation (ECO) scheme needs to be extended beyond 2026. Under ECO, obligated energy suppliers must pay for measures that improve the ability of low-income, fuel-poor and vulnerable households to heat their homes.

Ramping up home retrofitting must be twinned with high standards, to avoid any more insulation scandals, such as what we’ve seen in Fishwick, Preston and recently in the news. The government must also move forward with raising energy efficiency standards in the private rented sector.

As we’ve seen over the past decade, fuel poverty isn’t something that will just go away by itself.  The work of charities like National Energy Action can make a huge difference – Emma was helped with a fuel voucher, a winter warmth support pack, and had her debt cleared – but it’s up to the government to fix the problem on a national level. For the millions of others in situations like Emma’s, they will need government intervention help to lower their bills, get them out of debt and make their homes warm.

Matt Copeland is head of policy and public affairs at National Energy Action.

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