Social tariff could cut £300 from energy bills for poorest households

Introducing social tariffs has the potential to reduce the energy bills of the country’s most vulnerable by over £330 a year, at a relatively low cost to the government according to analysis from Cornwall Insight.

The research says that the introduction of the October Default Tariff Cap (price cap), offering discounted deals to low-income households, through the removal of the standing charge, or offering a 20% discount on the price cap unit rate could save eligible households £296.08 and £332.62 per year, respectively.

A typical dual fuel household signing up for a social tariff would see their energy bill brought down to approximately £1,600 per year for the first three months of 2024 and – while still above the historic levels for the cap – would represent material support to those struggling to heat and light their homes.

Additionally, the data showed that the package of support for social tariffs would come at a cost of approximately £1.3-£1.4bn. Less than 4% of the government’s £37bn expenditure on the Energy Price Guarantee and the Energy Bill Support Scheme over the past year.

Recent research by telecommunications regulator Ofcom indicates that up to 4.3mn households could qualify for a social tariff on broadband, and it is thought similar numbers could benefit from energy social tariffs.

The introduction of the tariff would bring energy into line with water and telecommunications which already offer such support to vulnerable households.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said “With the price cap struggling to keep bills affordable going into winter, and energy costs expected to remain above historical highs for the foreseeable future, the idea of energy social tariffs is gaining momentum. Many believe such support could be the much-needed lifeline for millions of people who are struggling to pay their energy bills, and their introduction would bring the energy sector into line with both its water and telecommunications counterparts.”

“While the government previously said it was open to discussion on support including social tariffs, progress has been disappointingly slow. Although there are already focused support measures in place for particularly vulnerable households, the harsh reality is that the price cap alone won’t shield many households from fuel poverty. Serious consideration of how to help the most vulnerable pay their energy bills needs to happen as soon as possible.”