Source · Select Committees · Public Accounts Committee
Fifty-Eighth Report - Energy bills support
Public Accounts Committee
HC 1074
Published 16 June 2023
Recommendations
2
Accepted
Publish analysis of unredeemed energy vouchers and actions to increase household redemption rates.
Recommendation
The Department is still not doing enough to ensure that support reaches the two million consumers on prepayment meters. Those on prepayment meters are typically on more expensive energy tariffs due to the cost of the systems used to run …
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Government Response Summary
The government provided analysis identifying low voucher redemption in urban areas, socially rented properties, and ethnic/multicultural areas. It took further actions including focused communications, coordinated media campaigns, and a ‘National claim your voucher day’, which improved redemption rates from 76% to 85% by May 2023.
HM Treasury
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6
Accepted
Set out timeline for REMA and plan to enhance electricity sector resilience against price shocks.
Recommendation
We are very concerned about the Department’s lack of urgency in addressing the energy market failures that are leading to high energy bills for consumers. During 2022–23, the UK experienced record-high wholesale gas prices. Since 2019, Ofgem has set a …
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Government Response Summary
The government plans a second REMA consultation in Autumn 2023, with overall timescales varying by reform complexity. It explains REMA will consider options to shield consumers from price spikes and notes the Contracts for Difference (CfD) scheme already provides insulation.
HM Treasury
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11
Accepted
Ensure administrative barriers do not hinder timely energy support for prepayment meter customers.
Recommendation
Prepayment meter customers pay for their energy in advance by topping up a meter with a smart card, ‘key’ or cash token. Those on prepayment meters are typically on more expensive energy tariffs due to the cost of the systems …
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Government Response Summary
The government agrees that the recommendation has been implemented, explaining it closely monitored Energy Bills Support Scheme voucher payments, published data, and conducted focused communications and a media campaign to improve redemption rates for prepayment meter customers from 76% to 85%.
HM Treasury
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Conclusions (25)
3
Conclusion
Accepted
The Department drew on lessons it had learnt from financial support it provided during the pandemic to reduce the risk of fraud and error of the schemes, but does not yet know how successful this has been. The Department estimates the energy support schemes will cost £69 billion, meaning that …
Government Response Summary
The government agrees, stating that teams working on energy support schemes have transferred to the new department to ensure lessons learned are not lost. It describes how experience is being used to improve future delivery and how lessons are captured and shared through individual schemes and a cross-cutting exercise. The response does not address fraud and error rates.
4
Conclusion
Deferred
HM Treasury and the Department do not fully understand the pressures the non-domestic sector will face when the EBRS ends in March 2023, or the potential risk of insolvencies. Many organisations are suffering financially from the aftermath of the pandemic and this has been exacerbated by recent high energy prices. …
Government Response Summary
The government agrees but deflects, stating the department will use findings from Ofgem’s non-domestic market review to inform future actions, with further details to be set out in the summer and plans to be taken forward by Autumn 2023, rather than the Treasury providing an immediate analysis.
5
Conclusion
Accepted
The Department does not yet know how its plans for winter 2023–24, or once support ends in April 2024, will impact households, or how it will ensure the energy retail market provides a fair deal for consumers. At the time of our evidence session, the Department’s plans for winter 2023–24 …
Government Response Summary
The government states it will keep the Energy Price Guarantee (EPG) in place as a safeguard for winter 2023-24 and continue the Energy Bills Discount Scheme (EBDS) for non-domestic customers. It has also committed to £900 in cost-of-living payments for vulnerable households and decided not to cap support for high energy users, keeping the EPG universal.
1
Conclusion
Acknowledged
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)2, the Former Permanent Secretary at the Department for Business, Energy and Industrial Strategy (BEIS), and HM Treasury about energy bills support.3 We also took …
Government Response Summary
The government highlights the £40 billion spent on energy support and notes it is learning lessons for future schemes. It is continuing to explore options for supporting consumers from April 2024 by improving the retail energy market and consumer standards.
23
Conclusion
Accepted
Since 2019, the Office of Gas and Electricity Markets (Ofgem) has set a price cap on the price per unit of gas and electricity for customers on standard default tariffs, which apply to consumers who have not signed up for a fixed-term contract tariff with their energy supplier. Between winter …
Government Response Summary
The government agrees with the observation, stating the price cap is now £2,074 for Q3 2023 and is forecast to fall. It confirms the Energy Price Guarantee (EPG) will remain a safeguard over the coming winter and outlines existing cost-of-living payments, while deciding not to cap support for high energy users to maintain universal access.
7
Conclusion
Acknowledged
Some off-grid homes and businesses had to wait longer to receive support compared to the schemes to support consumers connected to the energy grid. The Department started delivering payments through the non-domestic Alternative Fuel Payment Scheme in February 2023. On 6 February 2023, it expected that eligible consumers would receive …
Government Response Summary
The government agrees with the observation, highlighting its swift action and the inherent complexity of reaching off-grid households, and is now seeking to learn lessons for future scheme delivery.
8
Conclusion
Acknowledged
The delays to introducing support schemes for customers who use alternative fuels had a greater impact on consumers in Northern Ireland because of the higher percentage of consumers that use these fuels. More than two-thirds (68%) of households in Northern Ireland heat their homes using alternative fuel, like heating oil.16 …
Government Response Summary
The government agrees with the observation, explaining its swift action and the complexities of support delivery, and states it is seeking to learn lessons for future schemes, noting that support in Northern Ireland was delivered via a single cash payment with high uptake.
9
Conclusion
Acknowledged
We asked the Department what were the causes of other delays in getting support to customers. The Former Permanent Secretary told us that, in terms of operational challenges, the most difficult schemes were those where people were being asked to apply. For example, the Department launched its portal for 900,000 …
Government Response Summary
The government agrees with the observation, outlining its swift actions and the inherent complexity of delivering support, particularly for application-based schemes, and is seeking to learn lessons for future delivery.
10
Conclusion
Acknowledged
The Department told us that an important lesson it had learnt from the schemes was the complexity in implementing a universal scheme to reach all energy consumers living under different circumstances. The Former Permanent Secretary explained that the Department did not have enough bandwidth to look at such a complex …
Government Response Summary
The government agrees with the observation, acknowledging the complexity of reaching all consumers and that lessons learned are informing planning for future support, with the department seeking to learn lessons on delivery and communications.
12
Conclusion
Accepted
In response to our report, in January 2023, the government told us that energy suppliers had sent vouchers to all two million customers who had a traditional prepayment meter. It explained that it was urging customers to redeem vouchers through a communications campaign targeted specifically at traditional prepayment meter users, …
Government Response Summary
The government agrees the observation is implemented, having monitored voucher payments, used data for focused communication campaigns, and observed improved redemption rates for prepayment meter customers.
13
Conclusion
Accepted
We asked witnesses about the take-up rates for the vouchers. The Department told us that 76% of vouchers had so far been redeemed across Great Britain. It accepted that take- up was lower in metropolitan areas, and that the take-up rate was just 60% in London.29 The NAO found that …
Government Response Summary
The government agrees the recommendation is implemented, detailing its close monitoring of Energy Bills Support Scheme voucher payments and its efforts, including targeted communications and a media campaign, which led to an increase in voucher redemption rates from 76% to 85%.
14
Conclusion
Not Addressed
We asked witnesses about recent press coverage that had exposed the practice of some energy suppliers forcibly installing prepayment meters in people’s homes. Ofgem banned British Gas from forced installation of prepayment meters as of February 2023 and made a voluntary agreement with other energy suppliers which lasts until March …
Government Response Summary
The government agrees with the conclusion and states the recommendation is implemented, detailing its monitoring and efforts to improve Energy Bills Support Scheme voucher redemption rates for prepayment meter customers. However, the response does not address the core concern raised in the conclusion regarding forced installation of prepayment meters or the ending of support schemes.
15
Conclusion
Accepted
The Department had to design and implemented the schemes at speed to ensure they were in place for winter 2022–23. The Department took three weeks to implement the EPG and two months for the EBRS. At the start of the schemes, the Department assessed that the risk of fraud and …
Government Response Summary
The government agrees, stating it takes fraud and error risks seriously and is continuing proactive work with the Public Sector Fraud Authority to detect and reduce instances, and will work with external scrutiny providers to provide the Committee with latest estimated rates.
16
Conclusion
Accepted
The Department drew on lessons learnt from its financial support schemes during the pandemic to reduce the risk of fraud and error in the schemes.37 The Former Permanent Secretary told us that the Department’s previous experience from support schemes led to it collaborating from the outset with the Public Sector …
Government Response Summary
The government agrees, confirming its ongoing efforts to detect and reduce fraud. It further commits to writing to the Committee by the end of 2023 to outline how lessons learned from the energy schemes will be preserved and shared for future delivery.
17
Conclusion
Accepted
The Former Permanent Secretary told us that while the Department was “acutely conscious” of the fraud risks within the schemes, it thought that the design of the energy support schemes meant that the risks of fraud were much lower than those for loan schemes introduced during the pandemic. They explained …
Government Response Summary
The government agrees with the observation, affirming its serious approach to fraud and error risks. It commits to continuing proactive work to detect and reduce fraud and error, and will work with external scrutiny providers to provide the committee with the latest estimated rates.
18
Conclusion
Accepted
The NAO found that the risk of error was greater for EBRS than for EPG because the non-domestic energy market is more complex, less regulated by government and has a wider range of consumers. For example, energy usage and intensity vary significantly more between different industries within the non-domestic sector …
Government Response Summary
The government agrees with the observation, affirming its serious approach to fraud and error risks and its ongoing proactive work to detect and reduce instances in energy affordability schemes, promising to provide estimated rates.
19
Conclusion
Accepted
We asked the Department whether it had an estimate of the rate of overpayment within the schemes. Both the Former Permanent Secretary and the Department told us that they did not have an overpayment figure, but that overall, the Department was aiming to pay accurately.43 We also questioned the Department …
Government Response Summary
The government agrees with the committee's observation, affirming its serious approach to fraud and error risks in the schemes. It commits to continuing proactive work to detect and reduce fraud and error, and will work with external scrutiny providers to provide the committee with the latest estimated rates.
20
Conclusion
Accepted
In April 2023, the government will replace the Energy Bill Relief Scheme with the Energy Bill Discount Scheme. This will support businesses for 12 months from April 2023 by providing a discount on their energy bills if wholesale prices are above a certain threshold. Businesses in certain Energy and Trade-Intensive …
Government Response Summary
The government, perceiving an implicit recommendation, states it agrees and has implemented it. It outlines that HM Treasury carefully considers tax system impacts, DESNZ will publish monthly EBDS discount scales, and an evaluation of energy support schemes is being commissioned, with findings due by summer 2025.
21
Conclusion
Accepted
The reduced support could risk the Department achieving its wider economic objectives for the EBRS, such as reducing the effect of inflation and protecting jobs.48 The Federation of Small Businesses (FSB) told us that if energy prices remained high and the EBRS was taken away, 24% of their members would …
Government Response Summary
The government, perceiving an implicit recommendation, states it agrees and has implemented it. It details ongoing actions including reviewing the tax system, engaging with stakeholders, and commissioning an evaluation of the Energy Bill Discount Scheme and Energy Bill Relief Scheme.
22
Conclusion
Accepted
HM Treasury told us it was providing a range of support to businesses and the public sector through a number of measures, not just the energy support schemes. For example, it pointed to support provided through: covid support schemes; a reduction in business rates and funding paid via local authorities. …
Government Response Summary
The government, perceiving an implicit recommendation, states it agrees and has implemented it. It outlines its commitment to reviewing the tax system and reliefs, engaging with stakeholders, and commissioning an evaluation of the energy support schemes, confirming that the EBDS will provide a discount for 12 months.
24
Conclusion
Accepted
At the time of our evidence session, household bills were protected by the EPG cap at £2,500 until the end of March 2023, which will increase to £3,000 from April 2023 to March 2024.57 HM Treasury told the NAO that it did not have plans to extend the EBSS beyond …
Government Response Summary
The government agrees with the conclusion, stating the price cap is £2,074 for Q3 2023 and prices are forecast to fall. It confirms the Energy Price Guarantee (EPG) will remain a safeguard over the coming winter and the Energy Bill Discount Scheme (EBDS) will continue for non-domestic customers until March 2024.
25
Conclusion
Rejected
Following our evidence session government announced in its spring statement that it would maintain the EPG at £2,500 until the end of June 2023.63 The government has committed to consulting on amending the EPG as soon as is feasible after April 2023, so that those who use very large volumes …
Government Response Summary
The government states it agrees with the committee's implied recommendation but explicitly rejects the previously noted plan to cap energy support for very large users, deciding that Energy Price Guarantee support should remain universal. It also confirms existing energy support measures and cost-of-living payments.
26
Conclusion
Deferred
The approach to pricing electricity in the UK – known as marginal pricing - means that high wholesale gas prices results in high energy bills for consumers. This is because all electricity generators in the market are paid a fixed price per unit of electricity, which is determined by the …
Government Response Summary
The government agrees with the conclusion and states it aims to publish a second Review of Electricity Market Arrangements (REMA) consultation in Autumn 2023. The REMA programme will consider various options to protect consumers from future price spikes and ensure they benefit from lower cost renewables.
27
Conclusion
Accepted
We asked witnesses about the effectiveness of the marginal pricing system and whether what customers were being charged reflected the cost of producing the energy they used. The Department told us that it was looking into this issue through its Review of Electricity Market Arrangements (REMA).68 The REMA is a …
Government Response Summary
The government states it agrees with the committee's implied recommendation and commits to publishing a second REMA consultation in Autumn 2023, with a target implementation date for this step by Autumn 2023. It will also take quicker decisions on shorter-term reforms, while acknowledging that the overall REMA timescale depends on reform complexity.
28
Conclusion
Deferred
We asked about whether the vast majority of the additional cost of energy to UK customers was going into increased profits for the energy sector. Energy UK told us that in looking at decoupling electricity and gas, the government should look at ensuring cheaper prices in the long term. Energy …
Government Response Summary
The government agrees with the committee's observation and plans to publish a second Review of Electricity Market Arrangements (REMA) consultation in Autumn 2023. This programme will consider various options to shield consumers from future price spikes and ensure they benefit from lower cost renewables, with decisions on reforms taking place throughout the programme.