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Energy groups are preparing measures to fund extra support for UK customers this winter, under pressure from the government as it tries to defuse a row over seasonal fuel payments and curb household debt.
Companies are exploring a number of steps, including offering direct financial assistance, debt repayment holidays and energy efficiency measures, according to people familiar with the matter.
The move comes as Britons’ energy debt is at record levels due to the knock-on effects of the cost of living crisis, which is still exerting financial pressure on some households despite beginning to taper.
Miatta Fahnbulleh, minister for energy consumers, summoned major energy companies such as British Gas and Octopus Energy to a meeting at the end of August to discuss measures to support households beyond that which companies are legally obliged to provide.
Energy UK, the trade group, and major suppliers have since been in talks over what that support should look like. Discussions have covered whether the government will match the funding put in by industry, although this is considered unlikely. An announcement could be made within weeks.
“There’s a process under way,” said one industry executive. “[But] there are some complexities that need to be bottomed out before you make an announcement.”
Household energy bills are a thorny topic for the government even though the energy crisis, which started in late 2021, has eased since last year.
The typical bill is still higher than pre-crisis levels, with the price cap rising 10 per cent on October 1 due to an increase in wholesale gas and electricity prices. The price cap is a limit on the amount that energy suppliers can charge for each unit price of energy.
Consumer debt and arrears hit a record £3.7bn by the end of the second quarter of 2024, according to data provided by Ofgem, the energy regulator. It has already had to raise the price cap to help suppliers recoup bad debts.
Meanwhile, the government has faced criticism over its decision to axe £1.5bn in winter fuel payments for about 10mn UK pensioners. Some MPs, unions and charities claimed the move would put vulnerable people at risk.
Energy secretary Ed Miliband made energy bills a key part of Labour’s election campaign, promising that they will come down in the long term following investment in renewable energy.
Companies are keen to provide more support to customers beyond their legal obligations but ultimately want to see more permanent policy protection measures in place, such as special tariffs for more vulnerable consumers.
“We need to go beyond sticking plaster solutions,” said one industry executive.
EDF, one of Britain’s largest household suppliers, last week announced extra support measures, including offering help with debts and energy efficiency. The company said it had spent £40mn more than it was legally obliged to do in order to help customers since the energy crisis began.
Last year, Ofgem and Energy UK worked with 14 suppliers to agree a “voluntary debt commitment” for winter 2023-24 under which they committed to go beyond current licensing conditions to help households deal with energy bill debts.
Suppliers provided immediate assistance to those struggling to keep up with payments, and helped consumers manage their bills more effectively.
The government said it would do “everything possible to support vulnerable families this winter”, highlighting available support such as the “warm home discount” for eligible households.
Minister Fahnbulleh is set to meet energy executives “again in coming weeks to agree a credible and robust plan with vulnerable people firmly at the centre”, it added.
