Energy Bills Support

The Department would not yet be in a position to provide more targeted support to consumers and so reduce wasteful expenditure. Most of the £44 billion of support was provided through the schemes that were universal in nature, which means that some people who did not need the support still received it, affecting the schemes’ overall value for money. The support provided also did not match the support that was needed, as lower–income households received the same level of support as higher–income households. The non–domestic sector faced similar issues, with for example small, energy–intensive businesses struggling to access support which reflected a range of very different circumstances due to the Department’s initial poor understanding of the sector. The Department is still in the early stages of considering how combining information, such as from tax systems, which are based on individuals, and energy usage based on household consumption, might support better targeting in the future, despite it being almost three years since the spike in energy prices. 3 Stakeholders are concerned that delays in addressing administrative challenges with data matching will affect the ability for future financial support to reach those consumers who need it most. recommendation The Department should, by September 2025, set out a plan for how it would be able to target support to both domestic and non–domestic consumers in the future. This should include the actions it is taking to address the challenges with data matching.

The Department has not done enough to address the challenges of providing financial support to vulnerable consumers in the event of another crisis. The Department reported that between mid–2022 and mid–2023 the Energy Price Guarantee (EPG) and Energy Bills Support Scheme (EBSS) prevented around 289,000 households in England from going into fuel poverty. However, this was not enough to offset the wider impact of soaring energy prices, which still pushed an estimated 238,000 more households into fuel poverty overall. At the same time, take–up of the scheme supporting households without a domestic electricity supply, such as those in care homes and park homes, was low—only 18.2% in Great Britain and 19.1% in Northern Ireland (of the Department’s provisional estimate of eligible recipients). While the Department worked with local authorities on some schemes to identify vulnerable consumers, the low take–up suggests that this approach did not fully reach all those in need. The Department says it channelled funds via social landlords, but gaps in communication and data tracking meant some eligible tenants were still missed. The Warm Homes Discount, an existing support scheme that the Department expects will mitigate high energy prices this winter, excludes some groups who are more exposed to high energy costs like certain people with disabilities whose costs can be 25% higher than those without disabilities. recommendation The Department should, in time for next winter, develop strategies for providing financial support to consumers at greater risk of fuel poverty. These strategies should consider how to work with organisations with helpful insights, such as registered social landlords.

The Department and Ofgem are not doing enough to ensure people falling into debt with their energy bills receive the advice and support they need from their energy supplier. At the same time as energy prices have risen significantly so has the extent to which people have fallen into debt with their energy bills. Consumer energy debt is at a worryingly high level, with £3.7 billion owed by domestic consumers for both electricity 4 and gas in 2024 compared with £1.8 billion in 2021. Millions of people are living in cold conditions and cutting back on essential costs such as food. Many people who are unable to pay their energy bill struggle to receive good, accurate and helpful advice or support from their energy supplier. The Department accepts this is a serious issue and is working with Citizens Advice to look at what can be done to provide a stronger debt advice service to support customers. Ofgem has recently launched a review of service standards and support for people in debt; and the Department has initiated a wider review of Ofgem to ensure that it has the powers to address any poor outcomes for energy consumers. These reviews provide an opportunity to ensure consumers receive better support from their energy suppliers when they face difficulty paying their bills. recommendation The Department should collect data on how well suppliers are performing in providing advice and support to consumers that struggle to pay their energy bills. The Department should use this data as part of its review of Ofgem, to assess whether it has the information and powers to deal with suppliers that do not provide sufficient advice and support to consumers in debt.

We remain concerned that even after the crisis has subsided, UK electricity bills are the highest of the countries providing comparable data to the International Energy Agency. The UK had the highest electricity price out of 25 countries reporting both domestic and industrial electricity prices in 2023, (including taxes and levies) and electricity is currently four–times more expensive than gas. Despite repeated promises, the Department has delayed taking action to rebalance energy prices by shifting the cost of environmental levies from electricity to gas. In addition, the Department is reviewing how electricity prices are set for households so that they can benefit from cheaper rates if demand is low or when the weather means more energy is produced. But this review has been running for three years and remains on an uncertain timetable, meaning it is unclear when consumers will start to see the benefits through reductions to their bills. recommendation a. The Department should set out a timetable for policy decisions to reduce electricity bills through its previous commitments to rebalance the costs of electricity and gas. b. The Department should set out a timetable for implementing the proposals for change it has identified from its review of electricity market arrangements. 5

The Department has more to do to convince Parliament that it has a robust plan for ensuring security of energy supply to meet increasing demand. The security of energy supply is the highest priority for the Department. Energy demand is set to rise from increasing numbers of electric vehicles and heat pumps, data processing centres, as well as the move to building homes. The stability of the energy grid might be affected by the Department’s plans to move towards cleaner power by 2030, because intermittent renewable energy from wind and solar vary according to the weather conditions. Intermittent energy sources will therefore need to be complemented by flexible and baseload power. Nuclear is an important low–carbon form of baseload generation but there are questions around the life and capacity of the existing plants and the time needed to get small modular nuclear reactors up and running. In January 2025, the National Energy Systems Operator issued a routine notification to energy providers to increase supply, after energy generation briefly fell below a margin set to make sure demand in the days ahead was met. It acknowledged, however, that there had been some speculation about the seriousness of the situation. The Department indicated that supply levels had been lower in the past and the system responded effectively to the potential supply issues. But such interventions are not cost free–this response cost £21 million. DESNZ needs to make sure its public reporting of such incidents meets the highest standards of transparency. recommendation a. The Department should set out in its Treasury Minute response how it will make sure there is capacity in the grid when there is low generation from renewable energy during periods of calm weather, including from wider technologies like nuclear. b. The Department should, in time for next winter, work with the National Energy Systems Operator to explore ways of improving reporting on energy supply issues and how they are handle

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Energy Security and Net Zero (the Department) on its work to provide financial support to consumers in the light of significant increases in their energy bills.1

In designing the energy bills support schemes, the Department drew on lessons learned from support schemes during the pandemic, such as reducing opportunities for fraud by using information from energy suppliers to limit the need to apply for support and verify energy usage. It also worked with fraud experts in government, including the Public Sector Fraud Authority. Fraud and error levels in the energy support schemes were lower than for other schemes implemented during the pandemic.12 The Department estimated a fraud and error rate of 0.7% of scheme payments, worth £291.8 million.13 This is compared to 11% for Bounce Back Loans and an estimate by the Public Sector Fraud Authority of government fraud and error levels ranging from 0.5% to 5%.14 5 C&AG’s Report, para 1.6 6 C&AG’s Report, para 10 7 Qq 16, 18 8 C&AG’s Report, para 1.3 9 Q 9 10 C&AG’s Report, para 9 11 C&AG’s Report, para 17 12 Q 34 13 C&AG’s Report, para 10 14 C&AG’s Report, para 10 8

The Department has commissioned independent evaluations of all of its domestic and non–domestic financial support schemes.15 As part of these evaluations, the Department is reviewing whether approaches like universal support were effective, or if the cost of providing support to homes and businesses that did not necessarily need it (known as ‘deadweight’) was justified by the broader economic benefits.16

Despite it being nearly three years since the energy crisis, the Department has yet to complete all of these evaluations. However, it told us it would be relying on the findings it does have to inform any possible future interventions.17 An interim evaluation of the domestic schemes is delayed from the initial target of August 2024 to Spring 2025, while final evaluations of both the domestic and non–domestic schemes are delayed from spring 2025 to Summer 2025, partly due to the General Election in July 2024.18

The Department said it was frustrated that the results of the evaluations would not be available to it sooner.19 Even so, it told us it was confident that it was “ready to deal with whatever happens in international energy markets”, but stressed that “there is no evidence that there will be a further price spike”. It pointed to schemes like the Winter Support Commitment, which offers some households an extra £25 to support them with their energy bills, as a way of keeping bills affordable. However, these schemes would not be sufficient to shield households from the full impact of price rises should there be another energy crisis.20 Targeting support

Most of the £44 billion of support was provided through schemes that were universal in nature, which means that some people who did not need the support still received it, affecting the schemes’ overall value for money.21 Written evidence we received from Octopus Energy, for example, said that while the decision to provide universal support was necessary for the Department to move at pace, it resulted in higher than necessary costs.22 The support provided also did not match the support that was needed, as lower–income households received the same level of support as higher– income households.23 The Department told us that there were advantages 15 Q 16; C&AG’s Report, para 3.3 16 Qq 12, 16 17 Q 20 18 Q 17; C&AG’s Report, para 3.3 19 Q 17 20 Q 9 21 Q 12; C&AG’s Report, para 12, 4.2 22 EBS0003 23 C&AG’s Report, para 12, 4.2 9 in having broad–based schemes, as the “sheer scale of the price rises” meant that the number of households affected was so high that a universal intervention was required.24 But the Department acknowledged that it had to accept the risk of ‘deadweight’ in the schemes in order to introduce the schemes quickly.25

The Department said that even if it had wanted to, it would not have been able to target support at the time of introducing the schemes due to challenges with identifying household income to determine an appropriate level of support.26 Written evidence from the Energy Systems Catapult and Fair by Design highlighted a need for targeted support.27 To do this, the Department told us that it is now working with the Department for Work and Pensions to make best use of employment benefits data.28 It added that it is also working with the health service and local government to identify individuals in particular need of support alongside energy suppliers. The Department recognised that targeting support requires data linking to be effective, but highlighted “very significant technical and practical challenges” in doing so. It told us the “most difficult nut to crack” is still income data, which is collected on an individual level while energy usage is based on household consumption.29 The income data for self–employed individuals is also lagged, so it is “quite a long way out of date by the time it is fully organised”.30

The Department acknowledged that it does not have “a full answer at this stage” to the issues with matching income data with energy supplier data, despite it being almost three years since the spike in energy prices.31 Fair by Design highlighted that combining wider data from different departments alongside supplier data to target money to those who need it the most is not happening.32

The Department acknowledged that it knew less about the non–domestic sector than the domestic sector at the time of the interventions and that this “threw up a number of issues and complexities”.33 It told us that targeting the non–domestic sector was a challenge because of “level of data to allow us to categorise non–domestic suppliers into particular groups”. Although it used standard classifications of industry to understand which sectors 24 Q 12 25 Q 30 26 Q 13 27 EBS0001; EBS0008 28 Qq 13, 17 29 Q 13 30 Q 13 31 Q 31 32 EBS0008 33 Q 46 10 were particularly exposed to high energy costs, and which were more energy–intensive, the Department said there were “limitations around that data in the way it groups different sets of customers”.34 The Department’s poor understanding of the non–domestic sector led to it providing identical support for all businesses.35 Small businesses, however, do not have the buying power of some of the larger non–domestic customers to get good deals, and have a variety of contracts and arrangements.36 Some small businesses with high energy usage such as hospitality may have also missed out on additional support that they needed before the government began to target businesses deemed to be energy and trade intensive in March 2024.37 The Department said that it would want to target a future scheme more precisely using its “understanding of the different exposure that different parts of the sector had” to high energy prices.38 Identifying consumers most in need

The Department reported that from mid–2022 to mid–2023, the Energy Price Guarantee (EPG) and Energy Bills Support Scheme (EBSS) prevented around 289,000 households in England from going into fuel poverty.39 However, this was not enough to offset the wider impact of soaring energy prices, which still pushed an estimated 238,000 more households into fuel poverty overall.40

Take–up of the energy bills support schemes was lower among harder–to–reach households that did not receive a payment directly from their energy supplier; 41 and may have been affected disproportionately by energy price fluctuations.42 These households did not receive an automatic payment because, for example, they did not have a domestic electricity contract with a supplier, such as those living in park homes and on boats. They instead needed to apply for eligible support through schemes like the EBSS Alternative Funding (EBSS AF). Take–up of the EBSS AF in Great Britain was 18.2% of a provisional estimate of 798,700 potentially eligible households; and in Northern Ireland take–up of the same scheme was 19.1% of a provisional estimate of 28,000 potentially eligible households.43 34 Q 48 35 Q 46; C&AG’s Report, para 15 36 Qq 46, 48, 50 37 Q 46; C&AG’s Report, para 4.8 38 Q 48 39 C&AG’s Report, para 12 40 Q 28; C&AG’s Report, para 12 41 C&AG’s Report, paras 3.14, 3.14 42 EBS0006 43 C&AG’s Report, para 3.14, infographic on page 6 11

Although the Department worked with local authorities on some of the schemes aimed at households who were harder to reach,44 the low take–up suggests that this approach did not identify all those in need.45 The Department said that it attempted to use intermediaries such as social landlords, providing funds directly to landlords with a requirement to pass them on to tenants. However, the Department acknowledged that it “did not track the right people,” and there were “places where communication did not work”, adding that “absolutely, there were lessons to learn” in how it can do this.46

The Department said that the “biggest item of support” available to mitigate high energy prices this winter for vulnerable consumers, mainly those on benefits such as pension credit, is the Warm Home Discount scheme,47 which provides a £150 discount to eligible consumers.48 But certain vulnerable individuals like those with chronic conditions or disabilities that mean they are higher energy users are excluded from receiving this support because they are not included in the category of means–tested benefits.49 Written evidence we received from Sense showed that, on average, disabled households face energy bills 25% higher than non–disabled households; and, as of May 2024, 37% of disabled people on benefits were behind on energy bills.50 Consumer debt advice and support

Alongside a rise in energy prices, Ofgem statistics from June 2024 show the total owed by domestic consumers for both electricity and gas was over £3.7 billion compared with £1.8 billion at the end of 2021.51 A report by Clear Consultancy Services suggested that millions of people are living in cold conditions and cutting back on essential costs such as food; and concluded that “energy is the fastest growing type of debt presenting at debt advice services”.52 The same report also concluded that the value of energy debts rose by 33% between 2022–23 and 2023–24.53 It also suggested that “the majority of debt advisers said that energy suppliers are the worst, or one of the worst, categories of creditors that they deal with.” 44 Q 32; C&AG’s Report, infographic on page 6 45 C&AG’s Report, para 9; Q 28 46 Qq 32, 33 47 Qq 42, 43 48 C&AG’s Report, para 4.7 49 Qq 44, 45 50 EBS0002 51 C&AG’s Report, para 4.6 52 Clear Consultancy Services, Supporting households in energy debt, February 2025 53 Clear Consultancy Services, Supporting households in energy debt, February 2025 12

The Department recognised this as a serious issue. It made clear that, because in the first instance consumers facing energy debts should contact their energy supplier, the regulatory regime should that require suppliers to offer “good, accurate and helpful advice” and that the Department was expecting this of Ofgem. It told us that it was exploring options around the issues of the support and advice [that energy suppliers] offer consumers. 54 The Department said it has started a review of Ofgem which is looking to make sure it has the powers and capabilities it needs to address any poor outcomes for consumers.55 It is also working with Citizens Advice on whether more could be done to provide a “stronger debt advice service” for consumers.56 It also told us that it was working closely with Ofgem as it is consulting on and preparing its new consumer debt strategy.57 Written evidence we received from Fair by Design highlighted concerns, however, that a debt relief scheme proposed by Ofgem will not implemented until winter 2025.58 54 Q 52 55 Qq 53, 67 56 Q 52 57 Q 53 58 EBS0008 13 2 Responding to future energy price volatility Reducing electricity bills

The United Kingdom has the highest price (including taxes and levies) for domestic electricity out of 25 International Energy Agency (IEA) countries reporting in 2023. Similarly, the UK has the highest price (including taxes and levies) for industrial electricity out of 24 IEA countries, again reporting in 2023.59 The price of the UK’s electricity is almost four times that of its gas. This is partly because the government’s levy for environmental policy costs (such as schemes to support renewable energy development) accounts for over 10% of an electricity bill.60

The Department recognised that rebalancing was an important issue, given the ratio of electricity to gas prices was “high compared to many comparative countries” as a “lot of the policy [ … ] and network costs in this country are placed on electricity rather than on gas”.61 But it has delayed addressing this issue for three years.62 The Department told us that it is important to address this issue in a way which is affordable and fair.63 This is because some households cannot avoid using gas and might see their bills increase if levies were moved from electricity to gas bills.64 The Department provided assurances that it was taking this issue seriously, but could not provide a timetable for completing its planned work on rebalancing.65

Three years ago, in April 2022, the previous government launched its Review of Electricity Market Arrangements (REMA) as part of its British Energy Security Strategy. This was the government’s flagship policy to enable a net 59 Q 68; Department for Energy Security and Net Zero, Quarterly Energy Prices UK April to June 2024, September 2024 60 Committee of Public Accounts, Decarbonising home heating, Thirty-Seventh Report of Session 2023–24, HC 653, May 2024, paragraph 10; Qq 21, 22, 65 61 Q 21 62 Committee of Public Accounts, Decarbonising home heating, Thirty-Seventh Report of Session 2023–24, HC 653, May 2024, paragraph 11; Qq 21, 22 63 Q 21 64 Q 21 65 Q 22 14 zero power sector by 2035, subject to security of supply, while ensuring a fair deal for consumers.66 The Department aims to review how electricity prices are set for households so that they can benefit from cheaper rates if demand is low or when the weather means more energy is produced by intermittent renewable generation. The Department explained that decoupling electricity bills from fossil fuel prices would make them more stable and less exposed to international risks.67 The Department told us that it has “narrow[ed] down on a set of key decisions [it thinks] are important for shaping the market of the future”. The Department told us that it is committed to setting out its proposals “later this year”.68 Ensuring security of energy supply

Analysis from the Office for Budget Responsibility concluded that the size of the government’s financial support for energy bills (relative to Gross Domestic Product) was one of the highest in Europe because of the UK’s reliance on natural gas.69 The Department highlighted to us the importance of its clean power mission in “getting us off the rollercoaster” of international fossil fuel markets and volatile prices.70 It told us the deployment of, for example, low carbon renewable electricity will reduce the UK’s reliance on gas.71

The Department described energy security and the security of supply as its highest priority. We asked the Department what it thought about concerns, set out in a document published by Net Zero Watch called “Blackout Risk in the GB Grid”, that events such as certain weather conditions, or interruption to a few power stations, led to a situation in early January where the level of supply in the grid to meet energy demand fell to what it described as “worryingly low levels”; with a risk of “cutting off certain areas of electricity or even a blackout”.72 Indeed, on 8 January 2025, the National Energy Systems Operator (NESO) issued to energy providers an energy margin notice, one of a range of tools it uses to make sure there is a healthy margin between the demand for energy and the available supply.73 It cost NESO £21 million to achieve this (a similar intervention on 14 January 2022 cost £25 million).74 The Department assured us this was a “normal part” of the 66 Q 11; C&AG’s Report, para 4.14 67 Q 66 68 Q 54 69 C&AG’s Report, para 4.12 70 Q 9 71 Qq 9, 71 72 Q 5 73 Qq 5, 6, 8 74 National Energy Systems Operator, What happened with margins on 8 January?, 14 January 2025 15 system’s operation. It explained that such notices are “routine signals to the market about supply needing to be available”.75 It also told us that it “did not agree with the analysis” in the document from which we drew our concerns.76 NESO acknowledged, however, that there had been some speculation about the seriousness of the situation. In response, it published an article setting out the actions it took and shared the publicly available data that informed its actions.77

Demand on the grid is likely to grow due to the increased demand for electric cars and heat pumps and a rising number of data processing centres, as well as the move to building more new homes.78 In addition, the Department also has plans to achieve a decarbonised, or clean, energy system by 2030, which might impact on the stability of the grid because of the increased reliance on intermittent renewable sources of energy, such as wind and solar power. The Department recognised that it needs to make sure that, across the grid, it has sufficient flexible generation to accommodate variations in supply from intermittent renewables which vary according to weather conditions. It also noted the need to ensure that the grid can sustain a consistent pace of operation.79

In December 2024, the government published its pathway to a clean power system by 2030.80 We asked the Department what part it expects nuclear to play in the mix of low–carbon energy.81 Given the timescales involved to build new nuclear infrastructure versus ambitions for clean power by 2030, the government’s focus is mainly on existing nuclear plants.82 The Department said, however, there are questions around the exact life of the remaining nuclear plants in this country.83 Looking to what comes next, the Department told us that there will be more sites for nuclear power stations, particularly small modular nuclear reactors, a “new technology” for which Great British Nuclear is running a competition, concluding by spring 2025.84

We asked the Department why it was taking so long to get small modular nuclear reactors “up and going”.85 We also asked how it was going to make sure that a high percentage of the content of a modular nuclear reactor 75 Q 6 76 Q 8 77 National Energy Systems Operator, What happened with margins on 8 January?, 14 January 2025 78 Qq 6, 67 79 Q 7 80 Clean Power 2030 Action Plan: A new era of clean electricity, December 2024 81 Q 61 82 Qq 55, 61 83 Q 61 84 Qq, 61, 62 85 Q 62 16 was from the UK (which was not the case with offshore wind farms).86 The Department told us that there was nowhere in the world with an operating small modular nuclear reactor, and that it needed to make sure the procurement exercise for this technology was run appropriately.87 86 Q 64 87 Qq 62, 64 17