Millions of households will need more cash from the government to prevent them falling into hardship as energy bills soar to more than £3,200 a year this winter, MPs have warned.
A £21 billion support package pledged by ministers in May will be “eclipsed by the scale and longevity of the price increases” that are now expected to be seen, the Business, Energy and Industrial Strategy select committee said.
Darren Jones, the committee’s Labour chairman, said that “to prevent millions from dropping into unmanageable debt, it’s imperative that the support package is updated and implemented before October”, when energy bills are predicted to surge by 65 per cent.
In a wide-ranging report, the MPs also labelled Ofgem “incompetent” and “negligent” for weak regulation that resulted in the costly failure of 29 suppliers over the past year, called for an “urgent” programme of home insulation to help permanently cut bills, and said the government should rethink the energy price cap.
Rising wholesale gas and electricity prices have already resulted in energy bills for most households jumping to average £1,971 a year from April, when the price cap on standard tariffs was last updated.
Households are “increasingly struggling to pay their energy bills and are at risk of accruing large sums of debt”, while record numbers of people are simply going without energy because they cannot afford to top up their prepayment meters, the MPs said.
“With the price cap expected to rise to well over £3,000 this winter, the worst is yet to come,” they warned.
The government’s £21 billion support package announced in May includes a £400 rebate for every customer and £650 help for eight million households on certain benefits. At the time, the regulator was forecasting the price cap would rise to £2,800 in October, but continued high wholesale prices since then mean experts are now forecasting a much steeper increase to £3,244 a year.
MPs said they were “gravely concerned by the latest forecasts”, which would have “very serious consequences for households across the country, particularly those that are on low incomes, in fuel poverty, and in vulnerable circumstances”.
They urged ministers to “provide an immediate and better targeted update to its support package” — which currently sees second-home owners receive the £400 rebate twice — and said there would otherwise be “an unacceptable rise in fuel poverty and hardship this winter”.
They also called on the government to “implement urgent, far-reaching, and long-term measures” to better insulate homes to cut energy usage, amid predictions that energy prices could stay high until 2030. “Without addressing the underlying problem of draughty homes, the government will again be forced to introduce costly and avoidable short-term fixes,” the MPs said.
The recommendations come as part of a report into the effects of rising energy prices and chaos in the supply market, which has seen 29 companies collapse over the past year, costing consumers at least £2.7 billion and potentially as much as £4.7 billion. The committee criticises Ofgem for its failings in regulating the market ahead of the crisis, the scale and cost of which it says is “only comparable to the financial crash of 2008”.
The report also calls on the government to review the price cap, and consider the introduction of a heavily discounted “social tariff” for vulnerable households and a different kind of price regulation for everyone else.
A spokesman for the business department said: “No national government can control global inflationary pressures. However, we have introduced an extraordinary package of support to help households, including £1,200 each for the most vulnerable households. We are also investing £6.6 billion this parliament to improve the energy efficiency of homes, delivering savings of £300 a year on average.”
