Last week’s announcement that energy bills will fall by £75 a year for some customers will be welcome news for the 12 per cent of Londoners who are not able to keep their homes warm in the winter. Ofgem’s decision to cut the energy price cap will benefit households on default energy tariffs and prepayment meters. People in this group are disproportionately likely to live in fuel poverty, particularly the 21 per cent of Londoners using prepayment meters – they are twice as likely to be fuel-poor as customers on direct debit.
In reality, the £75 fall only scratches the surface of fuel poverty. The average amount needed by those affected by it to lift them back into the black is a staggering £298, rising to £385 for fuel-poor households living in the private rented sector. Further, once this fall in the price cap takes effect, energy prices will still be higher than they were at the start of the year. When cold and damp homes are known to have caused over 14,000 excess winter deaths in London in the last five years, far more significant action is needed now to prevent vulnerable Londoners from experiencing a challenging winter.
Ofgem recently consulted on its consumer vulnerability strategy, which sets out how plans for supporting energy customers most at risk of, or already experiencing, fuel poverty. At its centre is a commitment to focus interventions on groups experiencing certain risk factors. For example, Ofgem estimate that 1.5 million nationally people do not have a bank account, which makes it much harder to access the best deals available and increases the likelihood of paying for energy by prepayment. Similarly, living with a disability or mental health condition increases the barriers faced when trying to switch supplier or get the best value for money.
However, it is a challenge for energy companies and Ofgem to identify these at risk groups and take preventative and supportive action. In the UK, 1.2 million electricity accounts and 950,000 gas accounts are already in debt to their energy supplier, but identifying vulnerable households once they have reached this point is far too late.
Ofgem’s strategy focuses on using data and rolling out smart meters to develop a greater understanding of customer profiles, but there’s a danger with this approach of continuing to miss those customers who are already falling through the cracks in the system. Instead, Ofgem needs to work proactively in communities and with organisations such as Citizens’ Advice, job centres, food banks and GP surgeries to ensure that advice is reaching those who need it most.
What is most needed to tackle fuel poverty is a comprehensive retrofitting and energy efficiency programme, which is outside Ofgem’s remit but could, and should, be brought forward by national government. Its own climate change advisers identified energy efficiency as one of the key components needed to meet net-zero targets, another significant benefit of improving the UK’s housing stock.
In London, Sadiq Khan has developed the city’s first fuel poverty action plan, with energy efficiency at its heart. As part of this, the Mayor’s programmes have already delivered energy saving retrofitting to nearly 20,000 homes in London, saving up to £225 in energy bills each year. With additional government, Ofgem and energy company support, this could be rolled out even further to deliver greater bill and carbon savings for Londoners. It simply must happen to protect the most vulnerable from another cold winter.
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