Hope on horizon for those on social energy tariffs

By Jayne Warren - 29/07/2008

Amid ever increasing fuel costs, the energy regulator Ofgem has told energy companies that social tariffs for their poorest customers - defined as those spending more than a tenth of their income on energy - must match the cheapest deals on offer, including online deals. The aim is to ensure that those who struggle most to pay their energy bills, such as pensioners, will be assured of being on the best deal in their area.

Following the 2008 budget in April, the secretary of state for business, John Hutton, arranged with the big six gas and electricity companies that they would increase the value of the discounts they gave to social tariff customers by about £225m between 2008 and 2011. In practice, this should mean lower tariffs and smaller bills for an extra 100,000 customers, if they can show they entitlement.

The idea behind Ofgem’s new guidelines is to provide more clarity about what will be counted towards this increased social expenditure, and they have also set a tighter definition for social tariffs.

Ofgem’s Managing Director for Corporate Affairs, Sarah Harrison, said: “Tightening the definition of a social tariff assures eligible customers that they will be on their supplier’s best tariff in their area. This move also gives consumer advisers more confidence to recommend social tariffs.
 
“Ofgem’s guidelines allow for different ways to use the increase in suppliers social spend to help those customers most in need. The range of initiatives will help in the challenge to target support effectively so that the £225 million can contribute to tackling fuel poverty.”
 
But Duncan Sedgwick, Chief Executive of the Energy Retail Association (ERA), broadened the subject by commenting on the government's need to tackle poverty in the first place. He said: “We welcome Ofgem’s recognition of the vast range of measures that energy suppliers are putting in place to help their most vulnerable customers. However, whilst energy companies recognise they have a role to play in tackling fuel poverty, the issue of poverty in its wider sense has to be the responsibility of Government.

“Energy companies are no longer being asked to write a blank cheque - we now have clearer guidance as to where the extra money can be allocated to help the most vulnerable.”

Energywatch also welcomed the new policy - but pointed out that the most progressive suppliers, notably SSE and EDFE, were already offering this arrangement for social tariffs.
 
Richard Bates, policy advisor at energywatch said: “The guidance has not addressed the confusion that fuel poor consumers can face on whether they are eligible for their suppliers' social tariff, and will not ensure that all those who need such assistance are eligible for these tariffs. It is vital that older people in fuel poverty are helped, but people with disability or long term illness also need support.
 
“Substantial price increases seem imminent and households are going to be hit hard, so social tariffs can absorb some of that pain. We need them to operate to decent minimum standards and to include those who are most vulnerable.”

Some consumers may still be able to get a better deal by switching to another supplier, particularly if they are also able to change payment method, which is why it still pays to shop around.  But for customers who are unlikely or unable to switch and are eligible for a social tariff this ruling means they can be assured they will be on their supplier’s best deal.