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An end to the Warm Home Discount exemption?

The Government may be forced to revise its policy of exempting smaller suppliers from providing the Warm Home Discount, which provides a £140 rebate on energy bills for fuel poor pensioners.[1] MPs and charities have started a campaign claiming up to 200,000 pensioners are losing out because of this exemption.[2] With limited scope to demonstrate its commitment to helping bill payers after the imposition of a price cap, the Government might be persuaded to act to show it is committed to helping vulnerable consumers.

Capping energy prices was designed to help vulnerable consumers

While the Government’s cap on default energy tariffs is being introduced to help everyone, the rationale for taking this action has been explicitly linked to helping vulnerable consumers. Introducing the policy the Prime Minister, Theresa May MP, stated that ‘it’s often older people or those on low incomes who are stuck on rip-off energy tariffs, so…we are introducing legislation to force energy companies to change their ways.’[3] If the idea that price capping won’t help all vulnerable consumers takes hold, the Government may be accused of failing in its efforts to help them. That may prompt renewed action in the retail energy market.

If the price cap does not deliver cheaper deals it may prompt further intervention

The price cap will not necessarily lead to cheaper deals for vulnerable consumers, which may cause the Government to intervene more to help them. As uSwitch has pointed out ‘on the surface, money off people’s energy bills is a good idea — but concern lies around the effect on competition in the energy market, and whether a cap will actually result in higher bills. Suppliers may bump their standard plans to the price of the cap, leaving some worse-off than they were.’[4] If this happens, and it becomes clear that vulnerable consumers are being adversely affected, government may be open to criticism that its policy has been unsuccessful. In these circumstances the pressure to do more for vulnerable people will increase.

Removing the Warm Home Discount exemption for small suppliers may begin to look like a ready-made solution

Should government feel the need to demonstrate its commitment to help vulnerable consumers, removing the Warm Home Discount exemption for small suppliers may start to look an easy option. There are few policy levers that the Government can pull that can help up to 200,000 pensioners. For those with an interest in influencing policymakers’ thinking in this area now is the time to engage. The environment for doing something is developing, companies will want to ensure that something ends up being the right thing.

 


[1] Gov.uk, Warm Home Discount Scheme, link

[2] The Sun, 6 May 2018, link

[3] Theresa May, BEIS Press Release, 26 February 2018, link

[4] uSwitch, Why an energy price cap might not be as great as it sounds, 15 May 2017, link

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Myles Bailey
Deputy Managing Director