This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
1. Due to the rise in energy prices which impacted on consumers across the world, winter 2022–23 saw consumer energy bills rise to the highest levels on record. Last winter there were 4,706 excess winter deaths caused by living in a cold, damp home in England, Scotland and Wales. That is up from 3,186 excess winter deaths the year before.1 Last winter was considered mild.2
2. UK households are again facing the winter with high energy costs but with no specific financial support yet announced from the Government. This challenge will be exacerbated by wider cost-of-living pressures and accumulated energy debt, with the numbers of people in fuel poverty already soaring.
3. We recognise that the Government gave unprecedented levels of support to households to help consumers address the winter energy crisis of 2022–23. We also recognise that, while energy prices have fallen since last winter, they remain high compared to previous years. Nevertheless, we are concerned that the Government and energy companies have yet to announce specific strategies for the coming winter. Bills are predicted to stay high: annual bills for typical consumption will be 69% above their summer 2021 levels under the October 2023 energy price cap.3
4. We invited consumer organisations, energy companies, Ofgem and the Committee on Fuel Poverty to speak to us ahead of an apparently inevitable new winter crisis and received written evidence from charities, academics, industry bodies, individuals and private companies.4
5. We recognise that there was a change in Secretary of State during the time that the Committee was taking evidence for this report and that therefore the Secretary of State declined to appear before us on the grounds of being new in her post. We hope our Report is an opportunity to shape the new Secretary of State’s thinking and priorities as she leads the energy security and net zero portfolio.
6. With our witnesses and others, we have identified immediate and long-term priorities to address the problem of exorbitant energy bills for consumers. In the longer term:
will lower consumer bills.
7. We have three open inquiries which will investigate these longer-term priorities: Heating our homes; Keeping the power on: our future energy technology mix; and A flexible Grid for the future.5 This report focuses on immediate action that can be taken in advance of winter: providing targeted support to vulnerable groups this winter; taking a more proactive and empathetic approach across customer service; revising the current standing charge structure; and accelerating the rollout of smart meters.
8. Last winter saw energy bills escalate to unprecedented levels. This followed a global spike in wholesale oil and gas prices as economies came out of lockdown (2021) and Russia’s invasion of Ukraine (2022). The crisis caused many suppliers to fail: between July 2021 and May 2022, 29 suppliers went out of business in the UK market, directly leading to higher consumer bills.6 The average annual household bill for gas and electricity in the UK increased by 178% from £1,277 in winter 2021–22 to £3,549 in winter 2022–23.7
9. The Government took unprecedented steps to support customers last winter. It introduced the Energy Price Guarantee, which limited households to an average annual bill of £2,500, and the Energy Bills Support Scheme, which provided households with a £400 payment in monthly instalments between October and March. The Government followed this with an Alternative Funding scheme in February 2023 for those households without a direct relationship to an electricity supplier or without their own electricity supply.8
10. We recognise that these measures were introduced rapidly, but many people who desperately needed that support did not receive it, particularly those living off-grid or using traditional prepayment meters. Conversely, owing to the universal nature of the schemes, many households with fewer financial constraints did receive the payments.
11. Whilst we recognise that the demand to public finances represents a challenge, we are concerned that the Government and energy suppliers have yet to announce a holistic set of proposals to ensure there is support for vulnerable consumers this winter. Given the significant rise in fuel poor households (from 4.5 million in October 2021 to 6.6 million today, representing almost one in four of UK households),9 we would have expected the Government to have given earlier indication of support for this vulnerable group.10 We know that households with the lowest incomes spend a higher proportion of their total expenditure on energy and that last winter has compounded consumers’ ability to pay their winter bills this year.11
12. We have heard harrowing evidence of how, during the 2022–23 energy crisis, some people have had to make sacrifices to heat their homes. Dangerous coping mechanisms range from cooking on barbecues and using ovens to heat the home, to gambling to make ends meet.12 Cost-cutting measures include not washing children’s clothes; households rationing themselves to one shower a week; and people restricting themselves to one hot meal a day.13
13. Some of the most vulnerable people and households live off-grid and are not directly attached to an energy provider: care home residents, houseboat dwellers and park home residents. These customers were ill-served by the Energy Bills Support Scheme Alternative Funding, which only opened in February 2023 and required customers to apply for the rebate. Fewer than 200,000 bill-payers, out of over 900,000, successfully applied for and received the subsidy before the scheme closed on 31 May.14
14. National Energy Action told us that a total of £440 million was returned to the Treasury this year, which had been intended for energy bills support last winter.15 A total of £130 million of the Energy Bills Support Scheme remained unclaimed by households with traditional prepayment meters.16
15. We recommend that the Government ensures that all households who missed out on the 2022–23 Energy Bills Support Scheme and Energy Bills Support Scheme Alternative Funding should receive their payment with immediate effect.
16. There are various existing mechanisms the Government could utilise to deliver immediate support to vulnerable households this winter. Many witnesses stressed the importance of targeting those households that are not captured by current universal credit or other benefits but are severely squeezed by cost-of-living pressures, accumulated debt, inflation and high interest rates.17
17. The Warm Home Discount scheme requires participating suppliers to provide rebates on their energy bills to eligible low-income and vulnerable households in, or at risk of, fuel poverty. It is a one-off payment of £150 provided between October and March.
18. In 2021, the Government revised some of the qualifications for the discount, so that consumers had to receive Pension Credit or be in receipt of one of the qualifying means-tested benefits or tax credits and also live in a property with a “high energy cost score”. Consumer groups have underlined the importance of reinstating the Warm Home Discount to vulnerable customers with disabilities and medical conditions; those on low incomes who may not dwell in homes that are given a high energy score; and older people not in receipt of Pension Credit.18
19. We were disappointed to learn that not all energy providers are required to offer this discount and that providers who do offer it have a limited number of discounts which are given on a first-come, first-served basis.
20. We recommend that, this winter, the Government works to extend the Warm Home Discount to low-income and fuel-poor households, especially giving consideration to those with disabilities and medical conditions. Discounts should not be based on a first come, first served basis.
21. Social tariffs exist in other sectors to support those on the lowest incomes with utilities. Ofwat provides a social tariff for water, as does Ofcom for broadband.19 A social tariff for energy would set the price of gas and electricity below the cap on energy prices and be targeted at vulnerable customers with a low income or high energy needs.
22. In the autumn statement 2022, the Chancellor committed to consider a social tariff for energy to support vulnerable people.20 In “Powering up Britain: Energy Security Plan” (April 2023), the Government set out an intention to “consult in summer 2023 on options for a new approach to consumer protection in the energy markets from April 2024 onwards”.21 No further announcement has been made.
23. There is widespread support for a social tariff across the industry from energy companies, consumer groups and Ofgem. When asked, the Chief Executive of Ofgem provided a personal view that the proportion of the energy market a social tariff would represent would be between 20% and 30%.22 Citizens Advice, in partnership with the Social Market Foundation, has proposed a mechanism for deducing a flexible social tariff based on data including household income and the energy efficiency of the home.23
24. We urge the Government and energy suppliers to consider implementing a form of social tariff and other measures to protect vulnerable households from being cut off from their energy supplies. We note the challenges vulnerable households can face in benefiting from the energy savings that more energy efficient homes and appliances can bring. We recommend that such a social tariff should also be accompanied with measures that enable energy efficiency improvements. In the longer term, the Government should streamline the various existing schemes into a more targeted form of support for the most vulnerable, especially over the winter months.
25. If the average temperature falls below 0°C for seven consecutive days in a region, eligible households are granted £25 retrospectively through the cold weather payment scheme. Recipients include those on Pension Credit or income-related benefits.24
26. Witnesses told us that residents rarely calculate the average temperature over seven days in their area, and that this payment comes too late for recipients to adapt their behaviour.25 Caroline Flint, Chair of the Committee on Fuel Poverty, questioned whether this scheme is a useful, or timely, source of income in paying bills.26 She also raised the increased accuracy of forecasting in predicting cold weather in advance.27
27. In its current form, the Cold Weather Payment is an outdated, old-fashioned scheme. The Government should revise the Cold Weather Payment as follows: to be applicable on a daily rate after a one- or three-day cold-wave below freezing; to be based on the daily minimum temperature and not on an average; and to be provided in advance of forecast cold events.
28. The Household Support Fund is provided to local authorities to distribute to vulnerable groups struggling to pay for energy and water bills, food and other essential items. Recipients do not need to be getting benefits to receive the funds and Councils decide for themselves how to run their schemes.28
29. We heard that the success of this fund in reaching those in need is mixed across different local authorities. In some cases, for example, some rural communities and off-grid areas may not have had the impact that larger authorities have had.29
30. We recommend that the Government facilitate local authorities to share best practice in delivering the Household Support Fund so that all local authorities, especially those that are smaller and more rural, may learn from those who have delivered this funding effectively.
31. Customer service is of vital importance when consumers are struggling to pay. We were encouraged to hear about some of the initiatives energy companies have implemented to improve their customer service ahead of the winter. These included expanding their debt prevention teams and providing MIND training for agents to support customers facing mental health issues and suicide threats.30
32. But, overall, satisfaction rates are disappointingly low. According to Citizens Advice’s latest ranking of customer service, the average company achieved an overall rating as low as 2.73 out of 5.31
33. Ofgem has a consultation on consumer standards underway with requirements for energy companies set to be introduced by December 2023.32 The proposals include extending phone call opening times during the evenings and weekends; providing 24/7 emergency support to those cut off from their power due to a supplier fault; providing temporary repayment holidays when consumers are unable to pay; and making information on customer service performance available to inform consumer choice when switching.
34. We have consistently been told that those in greatest need of financial support are often also in need of more guidance in going through the process of identifying where they might qualify for financial support. Empathy is an aspect of customer service that is harder to quantify than the number of minutes a customer is on hold but potentially of greater importance for the most vulnerable. While some consumers may prefer to communicate online or through a chatbot, others prefer to speak to a human. We recommend that Ofgem consider how it should mandate that all customers, and particularly vulnerable groups, get more time, better attention and continuity of support from their energy supplier.
35. Charities and consumer organisations told us they have been inundated with requests for help.33 Citizens Advice had more inquiries from people who could not afford to top up their prepayment meter in 2022 than over the previous ten years combined.34 We were particularly concerned to hear that these organisations struggle to get through to a customer agent on behalf of a customer: in the time advisors spent waiting on a phoneline, they could have helped another customer in need.35
36. We recommend that energy companies be required to provide, on request, a priority phoneline for trusted intermediaries, charities and consumer organisations to access support for their clients over the winter months. This should be implemented ahead of this winter.
37. We recommend that contact empathy be used as a measure of success in customer service provision by energy companies. This would help to rebuild trust in the sector.
38. While we welcome the forthcoming set of consumer standards, we are disappointed that Ofgem did not anticipate the need for significant improvements ahead of this winter. Introducing them from December 2023 will likely be too late to see significant differences made this winter. We also believe that energy companies have not been sufficiently proactive in anticipating and exceeding the expectations of Ofgem and the public.
39. Ofgem and energy companies need to adopt a more proactive culture in improving industry consumer standards. Energy companies should not wait to be enforced to certain standards by Ofgem but should be innovating to improve customer satisfaction and attract more customers. We expect Ofgem to be quicker in challenging energy companies where they are failing to deliver quality customer service.
40. In most cases, customers’ bills are a combination of the cost of gas, or electricity, used with the daily standing charge. The daily standing charge is applicable to all billpayers, is applied regardless of how much energy is used, and, in October, will have increased by over 65% in less than five years.36
41. Ofgem conducted a review to assess whether recovering the costs of supplier failure should be charged through standing charges or unit rates. It concluded that, “while some low consuming users, some of whom may be vulnerable, might benefit from change, there are a number of higher consuming users including vulnerable users that would pay more”, and opted to retain the current structure, where standing charges are built into a tariff.37 At our oral evidence session on 13 September, Ofgem displayed a willingness to re-examine this structure.38
42. Standing charges do not vary based on customer income and we heard that standing charges have a disproportionate impact on the poorest households.39 Caroline Flint made the point that some components of the standing charge meant that poorer households were paying, through their energy bill, towards policy initiatives meant to reduce the burden of energy bills on them.40
43. A key criticism of the standing charge is that it disincentivises demand reduction. Money Saving Expert told us that customers pay £300 a year before they have used any energy, meaning that “those who are desperate and trying to cut back their energy usage gain minimal advantage from doing so”.41
44. We heard evidence indicating that the standing charge obfuscates customers from understanding precisely what they are paying for.42 Ofgem explained that around 50% is for operational costs; around a third is for the electricity network costs; and the remainder is for a mixture of costs, including policy costs.43 Ofgem made clear to us that energy companies can offer a fixed-term tariff without standing charges if they wish.44
45. Standing charges particularly affect prepayment customers: during a self-disconnection, standing charges build up as a debt on the meter that needs to be repaid before energy can be accessed again. The higher the standing charge, the longer households are likely to self-disconnect.
46. The current standing charge structure is unfair and regressive and penalises those on lower incomes or who are actively reducing their energy usage. The Government should engage with Ofgem to:
i) revise the standing charge model and replace it with a rising block tariff (also known as a consumption-based tariff) based on per unit cost, which would correlate costs with how much energy a household uses;
ii) make clear to consumers the breakdown of the standing charge between network costs, operational costs and policy costs; and
iii) remove operational costs from the standing charge, as these should be borne solely in consumer bills.
Suitable mitigations should be adopted to ensure that high-need vulnerable groups are not penalised by the removal of a standing charge.
47. At present, 4.5 million customers use prepayment meters. Around half of these are smart meters; the other half are traditional “legacy” prepayment meters, which require the customer to top up via an electricity key or gas card.45 Smart meters provide half hourly price and consumption data which can help consumers manage their consumption and costs. We heard that greater uptake in smart meters would enable companies to be “more responsive, more supportive and understand[ing]” of consumers struggling to pay their bills.46
48. The voucher redemption system for prepayment meters under the Energy Bills Support Scheme has attracted criticism throughout this inquiry. Problems associated with the scheme included: vouchers never reaching consumers’ current addresses; people being frightened to open the post; and “energy deserts” where recipients were unable to redeem the vouchers at a local post office or PayPoint vendor.47 As a result, a quarter of vouchers for consumers on prepayment meters were unclaimed.48
49. The importance of having funds distributed automatically, without a requirement to apply or redeem, has been emphasised to us.49 Smart meters could allow payments, such as the Cold Weather Payment, to be added directly to customer accounts ahead of a cold event.
50. Smart meters are an important way of incentivising good energy use, providing consumers and companies with information that can help to lower a household’s consumption. Energy companies must accelerate the rollout of smart meters, possibly by offering financial incentives to customers or tying energy efficiency support with installation of a smart meter, with priority given to the fuel poor.
5. In its current form, the Cold Weather Payment is an outdated, old-fashioned scheme. The Government should revise the Cold Weather Payment as follows: to be applicable on a daily rate after a one- or three-day cold-wave below freezing; to be based on the daily minimum temperature and not on an average; and to be provided in advance of forecast cold events. (Paragraph 27)
12. The current standing charge structure is unfair and regressive and penalises those on lower incomes or who are actively reducing their energy usage. The Government should engage with Ofgem to:
13. Smart meters are an important way of incentivising good energy use, providing consumers and companies with information that can help to lower a household’s consumption. Energy companies must accelerate the rollout of smart meters, possibly by offering financial incentives to customers or tying energy efficiency support with installation of a smart meter, with priority given to the fuel poor. (Paragraph 50)
Angus MacNeil, in the Chair
Mark Garnier
Mark Pawsey
Draft Report (Preparing for winter), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 50 read and agreed to.
Resolved, That the Report be the First Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No.134.
Adjourned till Wednesday 18 October at 1.00 pm.
The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.
WIN numbers are generated by the evidence processing system and so may not be complete.
1 38 Degrees (WIN0018)
2 Age UK (WIN0009)
3 Ambrose, Professor Aimee (Professor of Energy Policy, Sheffield Hallam University); Middlemiss, Professor Lucie (Professor of Environment and Society, University of Leeds); and Martiskainen, Professor Mari (Director of Energy Demand Research Centre, University of Sussex) (WIN0016)
4 Cadent (WIN0032)
5 Centre for Energy Policy, University of Strathclyde (WIN0025)
6 Centre for Sustainable Energy (CSE) (WIN0054)
7 Centrica plc (WIN0033, WIN0057)
8 Chapman, Ms Amanda (WIN0002)
9 Chartered Institute of Housing (WIN0013)
10 Citizens Advice (WIN0026)
11 Data Communications Company (WIN0036)
12 Department for Energy Security and Net Zero (WIN0039)
15 Electrical Contractors Association (WIN0031)
16 Electricity North West (WIN0023)
17 Electricity System Operator (ESO) (WIN0049)
18 End Fuel Poverty Coalition (WIN0028)
19 Energy Networks Association (WIN0041)
20 Energy Saving Trust (WIN0020)
21 Energy Systems Catapult (WIN0021)
22 Energy UK (WIN0044)
23 Environmental Change Institute, University of Oxford; and Cambridge Architectural Research (CAR) (WIN0040)
24 Fuel Bank Foundation (WIN0051)
25 Green, Professor Richard (Professor of Sustainable Energy Business, Imperial College Business School) (WIN0063)
26 Haddock, Stephen David (Retired Nurse, NHS) (WIN0001)
27 Institution of Engineers in Scotland (IES) (WIN0012)
28 Longden, Dr Thomas (Senior Researcher, Western Sydney University) (WIN0010)
29 MCS Foundation (WIN0024)
30 MND Association (WIN0004)
31 Marie Curie (WIN0038)
32 Mencap (WIN0019)
33 Money Advice Trust (WIN0047)
34 Montegriffo, Mr A (Community Organiser and Campaigns Manager, Devizes and District Foodbank) (WIN0007)
35 National Bargee Travellers Association (WIN0022)
36 National Energy Action (WIN0035, WIN0056)
37 National Gas (WIN0027)
38 National Housing Federation (WIN0011)
39 National grid (WIN0042)
40 OVO (WIN0034)
41 Octopus Energy (WIN0059)
43 Organise (WIN0055)
44 PGES (The All-Party Parliamentary Group for Energy Studies) (WIN0014)
45 Robinson, Personal Finance Research Centre and Geographical Sciences, University of Bristol Caitlin (UKRI Future Leaders Fellow and Proleptic Lecturer, University of Bristol); Atkins, Dr Ed (Senior Lecturer, University of Bristol); Collard, Professor Sharon (Chair in Personal Finance, University of Bristol); and Davies, Sara (Senior Research Fellow, University of Bristol) (WIN0005)
46 Scope (WIN0015)
47 Sense (WIN0048)
48 So Energy (WIN0030, WIN0060)
49 Souto, Dr Laiz (Senior Research Associate, University of Bristol) (WIN0006)
50 Thermal Storage UK (WIN0003)
51 UCL Institute for Sustainable Resources (WIN0017)
52 Utilita Energy Limited (WIN0053)
53 Zobaa, Dr Ahmed (Reader, Brunel University London) (WIN0029)
54 moneysavingexpert.com (WIN0046)
55 uSwitch (WIN0037)
2 End Fuel Poverty Coalition (WIN0028)
3 House of Commons Library briefing, “Domestic energy prices”, 15 Sept 23
4 List of published written evidence: https://committees.parliament.uk/work/7829/preparing-for-the-winter/publications/written-evidence/, 15 Sept 23
5 Link to other inquiries: https://committees.parliament.uk/committee/664/energy-security-and-net-zero-committee/, 15 Sept 23
6 House of Commons Library Briefing, “Introduction to the domestic energy market”, 15 Sept 23
7 National Audit Office, “Energy bills support”, Energy bills support (nao.org.uk), 24 July 2023
8 See National Housing Federation, https://www.housing.org.uk/news-and-blogs/news/energy-bills-support-scheme-alternative-funding-portal-is-now-live/, 15 Sept 23
9 National Energy Action, “6.6 million UK households still in fuel poverty”, 15 Sept 23
10 The Office for National Statistics estimates that there were 28.2 million UK households in 2022, 19 Sept 23
11 House of Commons Library Briefing, “Introduction to the domestic energy market”, https://researchbriefings.files.parliament.uk/documents/CBP-9768/CBP-9768.pdf, 15 Sept 23
12 Q4 [Adam Scorer], Q2 [Adam Scorer]
13 Q4 [Adam Scorer], Stephen David Haddock (Retired Nurse at NHS) (WIN0001)
14 BBC News, “Energy bill support: more than 700,000 households miss out”, 18 Sept 23
16 Data Communications Company (WIN0036)
17 For example, OVO (WIN0034), National Energy Action (WIN0035), Citizens Advice (WIN0026) and Centre for Energy Policy, University of Strathclyde (WIN0025)
18 For example, moneysavingexpert.com (WIN0046), National Energy Action (WIN0035), End Fuel Poverty Coalition (WIN0028) and Marie Curie (WIN0038)
19 Ofwat, “Customer assistance” and Ofcom, “Social tariffs”, 12 Sept, 23
20 HM Treasury, Autumn statement 2022, 18 Sept 23
21 Department for Energy and Net Zero, “Powering up Britain: Energy Security Plan”, 18 Sept 23
23 Citizens Advice, “Fairer, warmer, cheaper: new energy bill support policies to support British households in an age of high prices”, 18 Sept 23
24 Department for Work and Pensions, “Cold Weather Payment”, 18 Sept 23
25 For example, Dr Thomas Longden (Senior Researcher at Western Sydney University) (WIN0010) and Environmental Change Institute, University of Oxford, Cambridge Architectural Research (CAR) (WIN0040)
28 Department for Work and Pensions, “Household Support Fund: guidance for local councils”, 18 Sept 23
29 Q50 [Gillian Cooper], Q108–109 [Caroline Flint]
30 Q92 [Simon Oscroft] and Centrica plc (WIN0057)
31 The rankings are based on data Citizens Advice received from suppliers in June 2023. The ratings were based on complaints to the Energy Ombudsman; the Citizens Advice Consumer Service; and the Extra Help Unit (https://www.citizensadvice.org.uk/consumer/energy/energy-supply/get-a-better-energy-deal/compare-domestic-energy-suppliers-customer-service1/), 18 Sept 23
32 Ofgem, Consumer Standards - Statutory Consultation, 18 Sept 23
33 For example, Q3 [Adam Scorer], Q5–6 [Gillian Cooper]
34 Citizens Advice, “Millions left in the cold”, 18 Sept 23
36 National Energy Action (WIN0056)
37 Ofgem, “Follow up on our review into the arrangements for recovering the costs of supplier failure”, 18 Sept 23
38 Q236–237; Q239–240 [Jonathan Brearley]
39 For example, Q173 [Chris O’Shea] and moneysavingexpert.com (WIN0046)
41 moneysavingexpert.com (WIN0046)
45 National Energy Action (WIN0056)
47 Q20 [Adam Scorer], Q26 [Roni Marsh] and Q96 [Caroline Flint]
48 House of Commons Committee of Public Accounts, “Energy Bills Support (Fifty-Eighth Report of Session 2022–23)”, 19 Sept 23
49 For example, Mencap (WIN0019), Citizens Advice (WIN0026) and Q134 [Caroline Flint]