Today, Ofgem launched its consultation on standing charges and debt relief for vulnerable customers. Severn Wye CEO Sandy Ruthven unpicks the pros and cons for customers trying to save precious pennies on their fuel bills.
Ofgem’s consultation is welcome of course and, while we don’t know what the outcome will be, at Severn Wye we are pleased with the proposals as they stand. Again and again, we see vulnerable energy customers who would reduce their energy use as much as possible to save precious pennies, only to be hit by high and unexpected standing charges.
Disproportionate impacts
Over the past three years the standing charge – which goes towards energy infrastructure and new developments – has more than doubled for electricity: in 2021 it was below 30p a day and now it is over 60p. People on low incomes, people in small houses, and those living on their own, pay the same standing charges as larger families or those living in large homes. So we welcome the idea of a tariff that rolls the standing charge in with the day-to-day unit costs; such a tariff would mean standing charges were applied to bills in proportion to the energy consumed – so people using less energy would pay less overall.
Again and again, we see vulnerable energy customers who would reduce their energy use as much as possible to save precious pennies, only to be hit by high and unexpected standing charges.
Let’s be clear though; most people would not see a difference in their bills, and high-energy users would see a substantial increase under such a tariff. Some of those users would be especially vulnerable customers who need to run medical equipment, for example, or have to adapt their homes to cope with disabilities. If the standing charge is rolled into one tariff for everyone, then these customers will end up with even higher bills, making a disproportionately large contribution towards our energy infrastructure. As such, we are pleased to see Ofgem proposing these new tariffs as optional rather than compulsory.
Support with unmanageable bills
The other part of the Ofgem consultation announced today is a statutory duty on energy companies to offer reasonable debt repayment plans, and even to contribute towards large, unmanageable energy debts. Every day, our teams at Severn Wye support people to manage often crippling bills, helping liaise with energy companies to get whatever help is available. Some suppliers are already very responsive and offer good repayment deals and even money off for those who are really struggling. Others, however, are not, and we see their customers continuing to suffer under unmanageable debt repayments.
While these benefits might be available in principle, they are often out of reach of anyone who doesn’t understand the labyrinthine routes to securing them.
The way energy companies are organised, however, means finding this help can often be a lengthy and complicated process, requiring not just our advisers’ expert knowledge but patience, persistence and lateral thinking to get debt relief and payments sorted out. So while these benefits might be available in principle they are often out of reach of anyone who doesn’t understand the labyrinthine routes to securing them. A statutory duty for energy companies to do this should simplify the process and ensure more people can access the support they need without having to come to charities like Severn Wye.
In the long run, energy prices and standing charges need to come down. Prices for the energy we use and the standing charges we pay are more than double what they were three years ago. As such, many millions of people are struggling to pay their bills and are racking up unsustainable debts. This leaves them vulnerable to health conditions made worse by cold homes, damp, and mould, and facing the stress of having to choose between heating their homes properly and all of the other ever-rising costs of living.
We need to move away from an energy system reliant on global oil and gas prices towards a UK-generated renewable energy future.
The only way we can tackle this problem in the long term is to retrofit the UK’s 19 million leaky homes, which would reduce everyone’s energy bills by more than £350 on average. And we need to move away from an energy system reliant on global oil and gas prices towards a UK-generated renewable energy future.
It’s important to note that part of the standing charges we pay goes towards enabling both of these things, so as energy consumers we are playing an important part in creating this secure and sustainable energy future for us all.
