For the fourth winter in a row, British people are facing sky-high energy costs, with the average annual bill in England, Wales and Scotland to rise to £1,738 – an increase of 1.2% – from January. Compared with 2020-21, households are paying 65% more for energy, with £700 added to the typical yearly bill.
People are already struggling because of the cost of living crisis, so they have less ability to pay these high prices. Levels of energy debt are soaring as a result and fuel-poor households are forced to use dangerously low amounts of energy during cold snaps. Meanwhile, the energy industry continues to post huge profits. Just 20 firms have made more than £457bn since the start of the crisis.
Voters placed their trust in this government to fix the system, but they have been let down in their first winter. For some pensioners who previously benefited from winter fuel payments but now miss out, energy prices will seem higher than at any point. Those losing winter fuel payments this year could include up to 1.2 million pensioners in absolute poverty. Almost 85% of older people with a long-term health condition or disability will no longer receive support with energy bills this winter, and 1.7 million households have said they will not turn on their heating at all.
With Ofgem warning that high energy bills could last into next winter, ministers must support those most at risk from the ill effects of living in a cold, damp home. The solution backed by most charities is a social tariff – a unit discount on bills for those groups who have pre-existing health conditions, disabilities or other vulnerabilities that make them particularly at risk from rising energy prices.
In the long term, the government has inherited a broken energy system and it will take time to untangle the mess and bring down bills. As a country, we have suffered disproportionately from the energy crisis, as a result of our overreliance on volatile oil and gas.
Most of our heating is still derived from gas that is bought on international markets, with prices at the whim of global factors. Ed Miliband’s Department for Energy Security and Net Zero is on the right track, with its commitment to ramping up investment in homegrown, abundantly available renewable energy and infrastructure. But none of the benefits of a green future will take hold as long as the electricity pricing system is tethered to the price of gas-fired power plants generating electricity. Ministers must review options for reform, focusing on those that will reduce bills.
Ministers are also right to invest in grid infrastructure and look at innovative solutions to energy storage and pricing. The cost of grid upgrades is huge and will be added to our bills through standing charges. If this is allowed to continue, costs may rise rather than fall. The chancellor and Great British Energy need to find a better way to pay for nationally vital infrastructure.
Linked to this are the standing charges we pay as part of our bills just to access the grid. These have been inflated by tacking a range of obscure charges on to bills. Reform is long overdue.
Last week, the government made more money available and loosened planning regulations around heat pumps, in order to boost energy efficiency through its £7,500 grant scheme for homes in England and Wales. It also committed to investing in energy performance upgrades in social housing and rented accommodation.
It is another welcome step to bring down bills in the long term, but this needs to be extended to more households than the 300,000 targeted. Without significant investment in energy efficiency and insulation, there will be no way to reduce energy usage and therefore bills.
Ministers in the energy department understand most of this, but they need the backing of the chancellor and the prime minister to get the job done. If they make the right moves, it will be possible for Labour to say it has brought down energy bills come the next election.
