5th Report - Tackling the energy cost crisis

More effective data sharing between key stakeholders will be essential in making all government support schemes fairer, better targeted and cost effective. We welcome the Government’s plans to improve data sharing across Whitehall but believe it must move further and faster, recognising that more effective data sharing will be instrumental in tackling fuel poverty. Political will and cultural resistance, rather than legislative or regulatory barriers, have been the main obstacles to progress so far. (Conclusion, Paragraph 17)

The Government should immediately establish an Energy Data Sharing Taskforce involving energy suppliers, government departments, HMRC, local authorities, the National Health Service and relevant third parties. This should establish clear and effective mechanisms for data sharing with the specific ambition to improve the delivery of support schemes, enable the introduction of a social tariff and tackle fuel poverty. These improved mechanisms must be introduced before winter 2026–27. (Recommendation, Paragraph 18)

The Warm Home Discount is a crucial mechanism to tackle fuel poverty and we welcome the Government’s plans to broaden eligibility for the scheme for winter 2025–26. However, it is deeply troubling that millions of households in fuel poverty and many living with disabilities or long-term health conditions are still not eligible for support. This represents a major barrier to the Government’s plans to tackle fuel poverty. (Conclusion, Paragraph 26)

The value of the Warm Home Discount has increased by only £10 since 2011, while household energy bills have risen by more than £500. The current value of the rebate is wholly insufficient to support vulnerable consumers this winter and compounds a severe affordability crisis in this country. Given our proximity to winter, it seems unlikely that a fair social tariff could be introduced until winter 2026–27. (Conclusion, Paragraph 27) 44

The eligibility criteria for the Warm Home Discount should be broadened to include all households in fuel poverty and those meeting vulnerability criteria, such as those with disabilities or long-term health conditions. (Recommendation, Paragraph 28)

From winter 2026–27, the Warm Home Discount should be retargeted using a tiered approach, so that funding is allocated based on household need and energy usage, and the value of the rebate should be linked to wholesale prices. (Recommendation, Paragraph 29)

For all these reasons we believe that reducing energy costs for everyone should be made the top policy priority. (Conclusion, Paragraph 33)

There is a critical need to provide greater, targeted bill support for low income and vulnerable consumers throughout the year in the form of a social tariff. We are concerned by the lack of progress to date. (Conclusion, Paragraph 34)

We recommend that the Government launches a consultation on an energy social tariff by January 2026 and commits to introducing a social tariff on this basis ahead of winter 2026–27. (Recommendation, Paragraph 35)

The criteria for triggering the Cold Weather Payment is set too high and does not reflect the impact that extreme cold can have on vulnerable households. Inadequate and unpredictable payments, sometimes made weeks after a period of cold weather, do not give vulnerable households confidence to use their heating. This can have devastating consequences including energy rationing and severe ill health. (Conclusion, Paragraph 40)

The Government should explore reform of the Cold Weather Payment considering whether a £10 payment could be made to eligible households every day that the Met Office forecasts that the average temperature will be zero degrees or below the following day. This should be subject to the usual cost benefit analysis and, if viable, be implemented as soon as possible. (Recommendation, Paragraph 41) Protecting vulnerable consumers

The UK is experiencing a severe energy debt crisis that shows little sign of abating. Millions of customers currently owe more than £4bn in debt and arrears, a record figure that has more than tripled in just five years. This is having a devastating impact on the wellbeing of millions, while increasing energy bills for everyone. We welcome Ofgem’s proposals for an Energy Debt Relief Scheme, but a more permanent solution is clearly needed to tackle both an energy debt and energy affordability crisis. (Conclusion, Paragraph 48) 45

While millions of consumers struggle with energy debt and the fallout of the recent energy price crisis, there is no shortage of money in the wider energy system. It is completely inexcusable that while households are forced to ration energy and choose between heating and eating, energy networks have enjoyed windfall profits of around £4bn through financial outperformance of network price controls. (Conclusion, Paragraph 49)

Ofgem should introduce an ambitious Energy Debt Relief Scheme, funded by windfall profits made by energy network companies, that has broad eligibility and provides support automatically, without consumers having to apply or agree a repayment plan. The regulator should consult, by spring 2026, on a more permanent scheme to provide consumers with lasting protection against debt, including provisions for debt forgiveness. It must set out how profits made in the wider energy system could be used to fund this, such as windfall profits made by energy network companies. (Recommendation, Paragraph 50)

It is unjustifiable that financially vulnerable customers are expected to pay more for their energy under the Energy Price Cap because of their chosen payment method. This constitutes a poverty premium. (Conclusion, Paragraph 57)

Time-of-use tariffs that allow customers to optimise the benefits of low carbon technologies such as heat pumps, electric vehicles and solar panels are welcome additions to the retail market, rewarding customers with low energy prices and supporting flexibility of the energy system. However, they are mostly designed for affluent consumers, and those with smart meters and high levels of digital literacy. Without measures to protect vulnerable consumers, such as a social tariff and improved adoption of technology including smart meters, this threatens to create a retail market that deepens societal inequalities. Such tariffs must not be a substitute for lowering the costs of energy for everyone. (Conclusion, Paragraph 58)

Ofgem should set the Energy Price Cap at an equal level for all customers, regardless of their chosen payment method, taking effect from the price cap period January to March 2026. It must also ensure that customers who are in energy debt are given greater flexibility to switch their supplier and have access to a wider range of tariffs to better manage their finances. (Recommendation, Paragraph 59)

We welcome Ofgem’s ambition to reassess how costs are allocated across consumer energy bills, but we are unconvinced that its proposals for a mandatory zero or low standing charge tariff option will go far enough to address the inherent unfairness of the existing arrangement of standing charges. Moreover, while consumers should be given greater choice in how to pay for their energy bills, Ofgem must proceed with caution and recognise that its current proposals carry inherent risk for consumers, if 46 not accompanied by a robust information campaign and obligations on suppliers to ensure that consumers are adequately informed. (Conclusion, Paragraph 69)

Ofgem should exempt customers from having to pay the gas standing charge if they convert their home to electrical heating and no longer otherwise need a gas service. They should also work with retailers so that the accumulation of standing charges over the summer months by pre- payment meters do not require the full payment of those charges before they can begin to heat their home. Standing charges should never constitute more than 50% of money put onto a pre-payment meter. (Recommendation, Paragraph 70)

Ofgem should reassess the outcomes of its Targeted Charging Review and consult on how increased network costs resulting from a sharp increase in investment in electricity infrastructure could be allocated more broadly, including across wider parts of the energy system. It should complete this process by summer 2026. (Recommendation, Paragraph 71) Billing issues and redress

Energy bills are generally becoming more accurate, but the high cost of energy means that when billing issues do occur, the impacts are felt far more severely. In an era of smart metering, it is unacceptable that back bills are being issued more than a year after energy was used, often in breach of Ofgem’s rules. This can have a profound impact on customers already under financial strain and highlights a worrying disregard for Ofgem’s rules by suppliers. (Conclusion, Paragraph 78)

Ofgem should limit the back billing period to six months for customers with a smart meter. It should also publish annual data on the penalties it gives energy suppliers for breaching its back billing rules. (Recommendation, Paragraph 79)

The smart meter rollout has been sluggish, unreliable and has failed to achieve adequate coverage across Great Britain. Poor levels of reliability mean that many consumers are unable to benefit from more accurate billing, which has increased the occurrence of billing issues. It also limits access to flexible tariffs and the ability to sell energy back to the grid. Targets for suppliers have focused too much on the rollout of new smart meters, rather than the performance of existing ones. (Conclusion, Paragraph 84) 47

The Government must set ambitious new targets for smart meters by the end of this year, including interim rollout targets to 2030 and strict new targets for suppliers on the reliability of existing smart meters and a requirement that smart meters are operational, not simply installed. (Recommendation, Paragraph 85)

For most consumers, the Energy Ombudsman provides a good service and we welcome proposals to strengthen its powers and make referrals automatic. However, without statutory backing, the Energy Ombudsman remains toothless, which undermines the confidence of consumers to seek redress and emboldens suppliers to ignore its rulings. Thousands of consumers are seeing their energy supplier refuse to comply with the Energy Ombudsman’s rulings every year. (Conclusion, Paragraph 94)

We have reservations about the Government’s proposal to reduce the time before a case can be escalated to the Energy Ombudsman from eight to four weeks. This would likely inflate the volume of cases referred to the Ombudsman, which might slow down the process for consumers to achieve redress and increase consumer bills, given that a high referral rate would increase the fees paid by suppliers, which would likely be recovered via bills. (Conclusion, Paragraph 95)

The Government must place the Energy Ombudsman on a statutory footing and data should be published on the compliance of each supplier with its rulings, including whether these are delivered on time. The Government must also ban energy suppliers from carrying out debt collection practices while in the middle of an Energy Ombudsman investigation. (Recommendation, Paragraph 96)

All small and micro sized businesses should be covered by the Energy Ombudsman to provide a streamlined and widely understood process for dispute resolution across the entire sector. The maximum pay award that the Energy Ombudsman can grant to businesses should be increased to £50,000, to reflect the scale of billing issues affecting some businesses. (Recommendation, Paragraph 97) Business and industrial energy costs

High energy costs pose an existential threat to many UK industries and are among the greatest concerns facing businesses of all sizes. The UK’s industrial electricity prices are the highest in Europe and around four times higher than the US and Canada, which places UK businesses at a severe competitive disadvantage. This is undermining economic growth, forcing the closure of important production facilities and leading to the loss of high- paying, skilled jobs. (Conclusion, Paragraph 106) 48

We welcome support to reduce industrial energy costs in the Industrial Strategy but this does not go far or fast enough. Support for just a limited number of businesses underestimates the scale of the challenge and we are concerned that many businesses will not survive until support is introduced in 2027. The Government’s plans for funding these schemes are vague and there is an urgent need to extend support to SMEs. (Conclusion, Paragraph 107)

We agree with Make UK that the Government should introduce an opt-in energy bills discount scheme for businesses, whereby the Government provides eligible businesses with a unit rate discount, up to a maximum value, when wholesale prices rise above a certain price threshold, and businesses pay into the scheme when wholesale prices fall. This would mean that businesses could guarantee an energy price that is stable and internationally competitive. The Government should work with Make UK and other business groups to develop this scheme and ensure that it is available to both larger businesses and SMEs within six months of the publication of this Report. (Recommendation, Paragraph 108)

In its response to this Report, the Government should clarify how exactly it will fund the British Industrial Competitiveness Scheme and other support measures to reduce industrial energy costs in the Industrial Strategy. It must also clearly explain how it will support businesses prior to their introduction in 2027. (Recommendation, Paragraph 109)

We are greatly concerned by exploitative practices in the non-domestic energy market, especially instances of mis-selling and pressure selling, as well as excessive deposits and out-of-contract rates. These practices exploit resource-poor business owners who often lack the time and knowledge to procure a good energy deal. (Conclusion, Paragraph 116)

We recommend that Ofgem introduce a cap on out-of-contract rates and deposits that can be charged by suppliers to agree or renew business energy contracts. It should also introduce a mandatory 14-day cooling off period following a business energy bill first being issued by a supplier, where a business can exit an energy contract without penalty. (Recommendation, Paragraph 117)

We recommend that Ofgem require energy suppliers to clearly itemise and publish online all non-commodity costs charged on business energy bills to ensure full transparency of all costs. (Recommendation, Paragraph 118) 49