Utility Week

22 | SEPTEMBER 2022 | UTILITY WEEK "If we're trying to target the same people that currently receive Warm Home Discount, then is the answer a social tariff or a bigger Warm Home Discount?" Dan Alchin, director of regulation at Energy UK "Current fi nancial support will be inadequate because much of that money will be spent before winter kicks in. We are facing the bleakest of winters." Adam Scorer, chief executive, National Energy Action Energy retail that currently receive Warm Home Discount, then is the answer a social tari or a bigger Warm Home Discount?" For Lickorish, expanding the WHD, which he describes as a "blunt instrument", in lieu of a social tari , is not an e ective solution because the scheme does not re• ect actual energy consumption, whereas a social tari would. He says: "At the time the WHD came in, we probably had annual energy bills of under £1,000 a year. We're now talking about £4,000 a year. "The WHD has its value, but it's a blunt instrument. And also, I like the notion of any assistance we give to this group going to the electricity bill, because then it ceases to be in• ationary. If the money comes o the bill, it doesn't ‡ nd its way into the in• ationaryˆcycle." Elsewhere, other industry chiefs have their own ideas about what a social tar- i should look like and how it should be funded. Giving evidence to the BEIS Committee earlier this year, Scottish Power chief execu- tive Keith Anderson suggested the govern- ment introduce a de‡ cit fund in October where £1,000 will be taken from the bill of fuel poor customers, put into a fund and repaid over a 10-year period. "You can spread that across the whole consumer base, or government can partially fund it," Anderson said. Ultimately, the Scottish Power boss believes the price cap should be replaced with a social tari . "Right now, people on a prepayment meter pay more, and that is perverse. A social tari should be brought in to discount the price for people in fuel poverty and those on prepayment. The cost of that should be borne by those who can a ord to pay," heˆsays. Eon UK boss Michael Lewis, however, believes that as well as a social tari for the poorest, the price cap should be redesigned to cap the di erence between suppliers' cheapest and most expensive tari s – a rela- tive cap. In his evidence to the BEIS Committee, Lewis said: "The key point is that a ‡ xed- price tari in a market is very diš cult with- out creating unintended consequences. If you move to a relative cap, you move away from those unintended consequences, plus a social tari for vulnerable customers." Like Scottish Power, his company's posi- tion is that a social tari should be the cheapest available and funded by everyone else in the market. Yet spreading the costs over the consumer base in this way is not favoured by NEA, which wants to see the tab picked up by gen- eral taxation. Lickorish agrees, stating that "there is no way the market can withstand that kind of cross-subsidy. It has to be a properly funded social tari by the Treasury". While admitting this would lead to more borrowing, he says it is something that is "essential if we are to take the stress out of this for the poorest". The view from Westminster Although Parliament is in summer recess, MPs have joined the frenetic debate on pos- sible solutions to the crisis, with several in favour of social tari s. "It's an injustice that the poorest house- holds continue to pay higher energy costs because they're on prepayment meters. This must end and a social tari should be brought forward," Darren Jones, Labour MP and chair of the BEIS Committee, says in response to his committee's report. "This is an initiative we need to be put- ting in place pretty quickly when Parliament comes back in September, when of course there will be a new government," Conserva- tive MP Peter Aldous adds. Yet not all are in agreement, and Conservative MP John Penrose, himself a strong advocate of a relative price cap, believes the situation is too big for social tari s to resolve. He tells Utility Week: "In normal times, a single, simple social tari to help the small number of most vulnerable customers would be an obvious and sensible solution. But it isn't the answer to today's spiralling energy bills, which are a ecting a lot more of us. "That needs bigger and broader long-term answers like fundamental market reforms to get the falling price of renewables feeding into customer bills, and a relative cap to ‡ x the loyalty penalty too." Asked about where the political land- scape lies, Penrose acknowledges there is a consensus that something needs to be done and help is required. However, he adds: "I don't think there is a consensus and a coalition coalescing around any one potential solution yet. It may be that the select committee's report will be the beginning of that coalition starting to coa- lesce. But it's early days yet." If the government does follow the BEIS Committee's recommendation for a social tari , it will probably take many more months before it can implemented. As Alchin observes: "If you're looking at solutions for this winter, then I suspect a social tari probably isn't one of them because it would take time and that's not on our side. "But if you are looking at addressing the longer-term questions around a ordability and ensuring customers in vulnerable cir- cumstances and those at risk of fuel poverty can a ord their bills, it's certainly an option on the table." Yet there are others like Lickorish who believe if the work is put in now, a social tar- i could be possible by 1 January. Whoever succeeds Johnson as prime min- ister, their ‡ rst order of business must surely be tackling the cost of living crisis. They must act fast, though, because, as Lickorish observes, the clock is ticking and prices keep increasing. Adam John, senior reporter Analysis continued from previous page "Current fi nancial support will be inadequate because much of that money will be spent before winter kicks in. We are facing the bleakest of winters." , chief executive, National Energy Action "If we're trying to target the same people that currently receive Warm Home Discount, then is the answer a social tariff or a bigger Warm Home Discount?"

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