Consumer groups have called for an energy social tariff in the form of cash payments for the poorest households ahead of what they warn could be a decade of high bills. Citizens Advice said payments of up to £1,500 are now an "essential" long-term solution for millions of fuel-poor households over the coming years.
The call for targeted financial support by next year has the backing of a coalition of consumer and energy bodies including Martin Lewis and Energy UK and is part of a new report commissioned by Citizens Advice following nine months of consultation with industry and the public.
The report recommends cash payments according to individual household needs, delivered through a combination of HM Revenue and Customs (HMRC) data on household incomes and energy supplier knowledge of how much electricity and gas is used to show a picture of who needs help and how much.
More than 12 million households on the lowest incomes would qualify for support, and the average qualifying household would see their energy bill reduced by £381 - with some getting up to £1,500, according to the report's analysis.
Currently, households are spending more than twice as much on energy compared with 18 months ago, regardless of whether the UK Government's Energy Price Guarantee (EPG) remains at £2,500.
Martin Lewis told viewers of Money Show Live on Tuesday that he is now “99%” certain the planned increase to £3,000 from April 1 will not go ahead. However, Secretary of State for Energy, Grant Shapps, who took part in the programme to answer questions from the consumer champion and viewers, would not confirm it and said details would be set out by Chancellor Jeremy Hunt in the Spring Budget on March 15.
If the EPG remains at £2,500, 10 million households will face "crisis-level" energy costs, with more than 10 per cent of their income after housing costs going on energy - a key indicator of fuel poverty, the charity said.
But it warned that if the EPG increases to £3,000, that figure rises to 12 million.
People on the lowest incomes will be hit much harder, with energy making up more than half of their total household income after housing costs in either scenario - up from 34 per cent in 2019.
Citizens Advice said it helped 50 per cent more people with energy issues last year than the year before, and more than double that of 2020. Last year, it saw more people who could not afford to top up their prepayment meter than in the previous 10 years combined.
The charity warned energy prices are not expected to return to pre-pandemic levels for the next decade.
The report also calls for a national programme of loft and cavity wall insulation for all households in fuel poverty.
Citizens Advice Scotland’s social Justice spokesperson David Hilferty, said: “The energy bill crisis is not going to go away anytime soon and too many households are struggling to afford their bills. Even with measures like the Energy Price Guarantee, many people still need additional help.
“In recent months, demand for energy advice across the Citizens Advice network in Scotland has overtaken advice for Universal Credit and other benefits - that underlines the scale and depth of the energy crisis.”
He continued: “We know that the soaring cost of living bites harder for households on lower incomes who spend a higher proportion of their income on essentials such as energy and food.
“A social tariff would protect people who are currently faced with impossible decisions about how to spend limited resources and provide assurances over affordability in the longer term.”
Martin Lewis, founder of MoneySavingExpert.com, said: "I've argued for a social tariff for years, and now it could be a crucial building block to help repair our broken consumer energy market. When things return to a more normal situation, we must work out what energy market we want.
"There are two main routes - either regulate all pricing or have a competitive switching market. We've long aimed for the latter situation, but it has failed many. That's why we must be blunt and identify who are the legitimate and who are the illegitimate victims of competition.
"If I, as a wealthy, financially educated person choose not to switch, that's my problem. If a struggling low-income 90-year-old grandmother with onset dementia doesn't switch - that's all our problem. A social tariff looks to protect those who need it."
Energy UK deputy chief executive Dhara Vyas said: "Energy UK welcomes this research. It solidifies the need for more targeted support for consumers on an issue which requires an enduring solution, such as a social tariff.
"To ensure continued support for everyone and ease the burden of high living costs, suppliers are ready to work with the Government to make progress with the introduction of targeted support, such as a social tariff, no later than April 2024."
If you are struggling with energy bills or the cost of living crisis, the Citizens Advice network, along with other non-profit organisations such as Christians Against Poverty Scotand and Stepchange offer free, impartial and confidential advice.
Citizens Advice say that one in six people who sought advice from them last year saw some sort of financial gain - the average value of which was over £4,200.
You should always contact your energy supplier first if you are struggling to pay bills or heat your home as they are obligated to support customers, especially vulnerable ones, under Ofgem rules.
To keep up to date with the latest cost of living news, join our Money Saving Scotland Facebook page here, follow us on Twitter @Record_Money, or subscribe to our newsletter which goes out Monday to Friday - sign up here.
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