Rising energy bills this winter mean the government should step in to provide more help to households most in need, the body representing energy companies in the UK has said.
Persistently high prices in recent years have left some people needing “emergency support” on top of the existing £150 warm homes discount, Energy UK said.
He added that the bills were unaffordable for millions and that a “better targeted and more agile” support plan was needed.
On Wednesday, regulator Ofgem will announce the cap on energy prices starting in October and expected to hit a three-year high.
“Suppliers continue to do everything they can to help their customers, but in addition to persistently high bills, record levels of debt show how the current system is failing to provide adequate support to those who need it,” Energy UK chief executive Dhara Vyas said.
A new “social discount” system would lead to “a system that works better for everyone,” he added.
Ofgem reported late last winter that customers who had fallen behind on their energy bills owed suppliers a record £4.7bn. Wholesale energy prices have since risen, following the start of the war with Iran in February.
Energy consultancy Cornwall Insight predicts Ofgem’s cap on home price rises, which is set every three months, will rise by 4% when it is announced on Wednesday.
The increase will apply to household bills during the first half of next winter and follows a steeper 13% rise in July.
In addition to the conflict in the Middle East, Cornwall Insight said prices had been affected by heatwaves across Europe that had increased demand for power generation to support air conditioning and other cooling systems.
The price rise would offset the impact of Prime Minister Andy Burnham’s decision to remove VAT from household electricity bills from October, he added.
Currently, people on means-tested benefits are entitled to a one-off discount of £150 per warm home during the winter, something administered by the energy providers themselves. The rebate is paid through a tax on all energy users that is collected and redistributed through bills.
Energy UK said the Warm Home Discount reached six million customers, but there were another 2.5 million who needed help because a medical condition or a drafty home meant they used more energy.
He said that if the government allowed the combining of information on customers’ income, health and energy consumption, a discount scheme could offer targeted and adjustable support, and respond to changing needs and price levels.
The body said its proposed new scheme would cost £1.9bn – almost double the cost of the current scheme – but could offer £450 in support to some households.
Energy UK suggested that the new support scheme could continue to be partly funded by invoices or passed on entirely to the taxpayer, through government funding.
The last time the price cap reached a similar level was in July 2023, Cornwall Insight said, which was still below the peaks reached the previous year following the Russian invasion of Ukraine.
During that energy price rise, the Conservative government committed a total of around £40 billion. , externalof public spending to help households with energy bills.
The challenge of combining sources of personal data, including income and health, and the proposal of finding more taxpayer money to fund such a plan are likely to raise questions.
However, Adam Scorer, chief executive of National Energy Action, said this was the kind of approach his charity was calling for, especially as the Warm Home Discount has risen by just £10 in the last decade.
“We desperately need a new approach,” he said.
“There will be many details that will need to be ironed out, but if the government really wants to provide respite for people suffering from energy poverty, it needs to take on this challenge and work with energy companies and charities to design something that is truly fit for purpose.”
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