Source · Select Committees · Business and Trade Committee
Recommendation 45
45
Acknowledged
Paragraph: 182
We recommend that the Government urgently publishes its overdue Fairness and Affordability call for evidence,...
Recommendation
We recommend that the Government urgently publishes its overdue Fairness and Affordability call for evidence, particularly in the context of rising energy prices. We recommend that the review includes a distributional analysis of the impact that recovering policy costs from electricity and gas bills has on vulnerable customers and considers moving legacy policy costs to general taxation. Any reapportioning of policy costs from electricity to gas bills must be accompanied by mitigating negative impacts on fuel poor and vulnerable consumers. The review should also include an assessment of the impact that standing charges have on vulnerable customers, and whether these charges are appropriate for customers using prepayment meters.
Government response summary AI-generated
Ofgem will share all available information on distributional effects of different policies with the Department and the Committee and intends to refresh the data used for distributional analysis.
Summary of the government's response below — read the verbatim text to verify.
Paragraph Reference:
182
Government Response
Acknowledged
HM Government · verbatim extract
Acknowledged
The Government has taken decisive action through the new Energy Price Guarantee to reduce consumer energy bills. This action has superseded our commitment to publish a Call for Evidence on Fairness and Affordability. The Government will ensure that fairness and affordability remain at the heart of our approach to the energy system. Through the Energy Price Guarantee the policy costs on gas and electricity, worth around £150, are being temporarily suspended for households and businesses; meaning in total, the Energy Price Guarantee will help the average household to realise a saving of £1,000 per year. Schemes previously funded by green levies will be funded by the Government for the duration of these schemes to ensure the UK’s investment in home-grown, secure renewable technologies continues. The levies covered are the Renewables Obligation, Feed in Tariffs, Energy Company Obligation, Warm Home Discount, and Green Gas Levy. This ensures that the schemes funded by these costs can continue to operate and make our energy system cheaper, increase robustness and boost sustainability. On standing charges, this is a matter for Ofgem. Ofgem recently published an open letter and follow-up decision on standing charges and the implications for vulnerable consumers (https://www.ofgem.gov.uk/publications/follow-our-review-arrangements-recovering- costs-supplier-failure). In particular it notes that: Responses to the Committee’s Third Report of Session 2022–23 13 • The correlation between energy consumption and vulnerability is complex, with a move away from the standing charge expected to see additional costs falling on customers in receipt of disability benefits and with health conditions, rural pensioners, and electric heating users; • A typical customer with a Prepayment meter would likely be slightly worse off from a volumetric charge as compared to the current fixed charge. We will continue to consider our longer-term approach to rebalancing the policy costs on energy bills, taking into account the impacts on vulnerable consumers as well as the need to incentivise and ensure energy security and decarbonisation.
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