The chief executive of UK’s third largest energy supplier, Ovo Energy, has called for the government to introduce a “progressive” scheme for energy bills that would give greater support for poor households but taper off for richer users, similar to the UK’s tax system.
The proposal for a banded energy subsidy is part of a 10-point plan put forward by Stephen Fitzpatrick, whose energy company serves 4.5 million customers.
It would involve reducing the price of energy, but only for a limited amount of use per household, meaning that energy consumption beyond that level would be charged at a higher price. This would aim to prioritise support for poorer customers, since higher-income households typically use more energy, he said.
The proposal is a variation of the “deficit tariff scheme” already backed by energy firms including Scottish Power, which would involve freezing prices at current levels and cover the difference through a central fund repaid over a number of years.
“The scale of the shock of the recent price rise this winter threatens to tip the economy into a deep recession and will be catastrophic for millions of low income households,” Fitzpatrick said on Thursday. “It is right that we find ways to smooth further price increases in the short term.
“But this scheme can’t be open-ended and unlimited. It should be progressive just like the tax system,” he said.
Fitzpatrick said there would be exceptions, given that some vulnerable customers, such as those who have at-home medical care, would use more energy. However, those customers should be identified through the fuel poverty taskforce and helped through targeted support, Fitzpatrick added.
Overall, his proposed scheme would also incentivise people to cut down on their energy use, the energy boss said.
His proposal comes just days after Ofgem announced the energy price cap would increase by 80% from October, taking the average gas and electricity bill from £1,971 to £3,549 a year.
Speaking to Sky News about energy prices during a visit to the US, the chancellor, Nadhim Zahawi, said he was working with energy firms and non-governmental organisations to ensure that struggling households get financial help. “No one should be cut off because they can’t afford their bills,” he said.
He acknowledged that the current level of government support would not be enough, but stressed that his team was looking at a range of options for the next administration, widely expected to be led by the Conservative party candidate Liz Truss.
“There’s nothing off the table. We are looking at all the options: everything from the chief executive of Scottish Power talking about help where we need to maybe create some sort of a fund for companies to be able to continue to help their customers, all the way through to making sure we target the help to both households and small- and medium-size businesses and probably some larger businesses.
“One of my concerns is the scarring effect on the economy if perfectly viable businesses in hospitality, in leisure, in high-energy use businesses would actually suffer or no longer exist because of Putin’s use of energy as a weapon,” he said.
The chancellor added he was also working with the Bank of England to provide better liquidity in the wholesale energy market, in hopes that it would reduce the energy price cap by £400-500.
