(Commonwealth_Europe) Energy companies have pushed back against Ofgem’s latest proposal to shake up the way households pay for their gas and electricity, warning that the plans could make life harder for many customers already struggling with high bills.
The energy regulator’s proposal, announced in September, would require suppliers in England, Scotland, and Wales to offer at least one tariff with lower standing charges, the fixed daily fee customers pay just to be connected to the grid. However, those tariffs would come with higher per-unit costs for the energy people actually use.
At a hearing before the Energy Security and Net Zero Committee, senior executives from the UK’s biggest energy suppliers expressed scepticism, questioning whether this change would really help anyone. Some even suggested that standing charges should be scrapped entirely.
Rachel Fletcher, director of regulation and economics at Octopus Energy, summed up the frustration shared by many in the industry: “A lot of the concern about standing charges is just that people can’t afford to pay their bill. Where Ofgem is going is not going to solve any problems; it could make things worse.”
Other energy executives warned that the plan could unintentionally penalise customers who are already vulnerable. They said households could end up choosing tariffs that seem cheaper at first glance, only to face higher overall costs later. The deeper problem, they stressed, isn’t how bills are structured; it’s that energy itself has become unaffordable for too many people.
Many called instead for a “social tariff”, a special discounted rate for low-income households, funded by other billpayers or with government support. The idea is to provide ongoing protection for people most at risk of falling behind on payments. Energy UK, the trade body representing suppliers, recently echoed that call, urging ministers to introduce “enduring” government help for those struggling to keep up with rising bills.
The government, for its part, points to measures like the Warm Home Discount, which gives £150 off winter bills for eligible households. About one in five homes benefits from the scheme, though it’s ultimately funded by a small rise in everyone else’s energy costs.
Meanwhile, energy debt is soaring. The total amount owed to suppliers hit a record £4.4 billion between April and June. More than a million households now owe money with no repayment plan in place—another record high.
Adding to the tension is the October rise in Ofgem’s energy price cap, which increased by 2%. The cap limits how much suppliers can charge per unit of energy on variable tariffs, but even with that protection, many families are feeling squeezed.
Executives also used the parliamentary hearing to highlight another issue: the imbalance between the price of electricity and gas. Simone Rossi, chief executive of EDF UK, told MPs that electricity is disproportionately expensive in Britain compared to gas—and to prices in many other countries. That price gap, he warned, discourages people from switching to cleaner, electric technologies such as heat pumps or electric vehicles.
Energy Secretary Ed Miliband acknowledged the problem in a BBC interview on Tuesday, saying one option under review is to shift green levies, essentially environmental taxes, off electricity bills and onto gas. These levies currently make up around 16% of an electricity bill and 6% of a gas bill, according to research by the charity Nesta.
The idea, long backed by the Climate Change Committee, is to make electricity cheaper to encourage households to switch to low-carbon systems. Energy UK estimates that if the policy costs were fully rebalanced, households using heat pumps could save up to £7,000 over 15 years compared with those relying on gas boilers.
But such a move would also mean higher costs for homes that still depend on gas heating, a reality Miliband was quick to acknowledge. “We’ll only ever do that in a way that’s fair and genuinely reduces bills for people,” he said. “Fairness is my watchword.”
Not everyone was convinced that such a shift would achieve that. Chris O’Shea, chief executive of Centrica, which owns British Gas, cautioned MPs that moving policy costs to gas bills would effectively be “a subsidy from the poor to the rich.” Many wealthier households are the first to adopt electric vehicles or heat pumps, he noted, while low-income households—who tend to live in older, gas-heated homes—could be left paying more.
The government maintains that it has not yet made any decisions. But as the debate over energy fairness deepens, both industry leaders and ministers face the same uncomfortable truth: millions of people in the UK are struggling not just with how energy is priced but with the simple fact that they can’t afford to keep the lights on.
