CSE responds to BEIS report on Energy pricing & the future of the energy market

CSE’s director of household energy Ian Preston responds to the BEIS Select Committee report...

26 July 2022

The cost-of-living support package pledged by the government in May will be “eclipsed by the scale and longevity of the price increases” that are now expected to be seen, the Business, Energy and Industrial Strategy select committee said. The Energy pricing and the future of the Energy Market report out today (26 July 2022) strongly recommends the support package is updated and implemented before October when the next energy price cap will hit.

Since the package was first announced in May the Centre for Sustainable Energy (CSE), along with our campaigning partners, have argued it doesn’t go far enough. Ahead of this winter, Ofgem must work with suppliers to identify vulnerable prepayment customers at risk of self-disconnection and offer to convert them to credit mode to maintain their supply.

Failure to regulate the market

The select committee also labelled Ofgem “incompetent” and “negligent” for weak regulation that resulted in the costly failure of 29 suppliers over the past year. CSE agrees that Ofgem failed to regulate the market. Alongside this, it’s failing to make sure suppliers apply the ability to pay principles. This means that customers in debt aren’t always fairly treated. Ofgem has also failed to protect vulnerable customers by not implementing its own Consumer Vulnerability Strategy.

We highlighted this in our True Cost of the Energy Price cap report which also showed one of the main reasons for the extortionate increase in energy bill standing charges is to cover the costs of the collapse of these 29 energy suppliers. This is particularly unfair for people on low incomes and those on prepayment meters. These households are less likely to switch energy supplier so it’s unlikely they ever benefited from cheaper energy deals before suppliers went bust. It’s not fair that these households are paying for the energy market failure through bills.

Urgent programme of home insulation

The BEIS select committee report also calls for an “urgent” programme of home insulation to help permanently cut bills. CSE has been calling for this for years: we need to literally insulate ourselves from future price rises. And we need this national programme of home insulation to be coupled with a skills strategy. This would create jobs and expand the skills we need to retrofit our homes.

Very worrying comments about green levies

Today’s report comes against a backdrop of Liz Truss’s commitment to reduce Green Levies, which is clearly about appealing to the Conservative party membership, it’s not about good outcomes for households or long-term energy security.

In 2013 David Cameron’s Government chose to cut green levies. This not only cost peoples jobs but as a result people’s bills are nearly £2.5bn higher than they would have been if climate policies had not been scrapped.

But to be clear, our bills haven’t gone up because of policies to make our homes more energy efficient or expand generation from renewables. 94% of the expected rise from £1,971 cap now to £3,285 in October is due to wholesale energy prices. Green levies make up 3% of bills.

Contracts for difference mean that renewables are actually reducing our bills when wholesale prices are high. 

Urgent support for advice services

Every month, CSE’s advice service helps thousands of people reduce their bills and we’ve already seen unprecedentedly high numbers of people seeking energy saving or financial advice and we’re fully expecting another surge this winter.

This latest report from the BEIS select committee is an important step in looking at the regulation and ensuring lessons are learned. CSE continues to call for policy shifts to even the impact of the energy price cap increase. But the only long-term solution is insulation.  We need to stop energy waste from cold buildings and homes. If you insulate someone’s home, you are literally insulating them against the cost of energy.

CSE is calling for:

  • Warm Front 2.0. A national insulation programme for England that delivers solid wall insulation to fuel poor households. This would boost employment and training via an accompanying apprentices programme. 
  • A separate price cap for prepayment meters. Due to the barriers prepayment meter customers face in accessing the energy market, Ofgem needs to re-establish a separate price cap for these customers to protect the most vulnerable households in the UK.
  • Redesigning the standing charges. The extortionate standing charges need to be tackled and slimmed down so that customers are only paying the fixed costs to supply them.
  • Funding for advice. Energy advice support services are overwhelmed and there is no national funding for in-depth fuel poverty support and advice. The government needs to establish a national network of local energy advice providers to support the most vulnerable households.

Notes

The Centre for Sustainable Energy (CSE) is a national charity supporting people and organisations across the UK to tackle the climate emergency and end the suffering caused by cold homes. For over 40 years, we’ve supported people to take effective action on energy in their homes. Our research and analysis focus on making the energy system greener, smarter and fairer.

Fuel poverty is when people have to spend a high proportion of their income to keep their home warm. This is due to a combination of poor housing with inadequate insulation and heating, expensive energy tariffs, and low incomes, meaning people can’t afford to keep warm.

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