Those in ‘fuel stress’ set to double in April

It comes after the energy regulator Ofgem confirmed it would increase the energy price cap by £693 to £1,971 for those default tariffs, a rise of 54%, taking effect from 1 April. Those on prepayment plans, meanwhile, will see an increase of £708 going up to £2,017. 

According to the Foundation’s research, the government’s Energy Rebate Plan - which it says provides almost universal support with energy bills rather than targeted support for low-income families - will reduce “fuel stress” (those spending at least 10% of their family budget on energy bills) but it will be far from the end of it. 

The policies will prevent the price cap increase trebling “fuel stress” to more than six million, but it’s still set to double by 2.5 million to five million families in total. 

The Energy Rebate Plan, which was brought to parliament by chancellor Rishi Sunak shortly after Ofgem announced the energy price cap increase, includes a £200 rebate on energy bills this year across Britain. 

Additionally, the plan provides a £150 council tax rebate for those living in A-D band properties across England - with funding for Wales, Scotland and Northern Ireland - and extends the Warm Homes Discount to an additional 780,000 families across England and Wales. 

And, while the plan will provide significant support of £350 to about four-in-five households, according to the Resolution Foundation, by opting for near-universal rather than targeted support the package doesn’t offer enough to many low-income families who find themselves at the heart of the cost of living crisis. 

It also notes that around one in eight of the poorest tenth of families don’t live in band A-D properties and therefore won’t receive the rebate automatically. Alongside this, those that don’t pay Council Tax won’t get the full package of support either. 

It adds the majority of the £9bn plan will be funded by higher energy bills over five years from 2023, explaining this is a risky strategy - particularly if the price cap rises again in October 2022 and April 2023, as it will bake in high energy bills for many years to come. 

Commenting on the study, the Resolution Foundation’s principal economist Adam Corlett, said: “The £693 rise in the energy price cap this April would have trebled the number of families falling into fuel stress overnight. The chancellor has rightly responded with an ambitious plan to limit the rise in bills this year.

“However, by opting for near-universal support over targeted help for low-income families at the heart of the current cost of living crisis, the number of families in fuel stress is still set to double.

“Households will have to wait until October for the Energy Bills Rebate to actually kick in, while around one in eight of the poorest families could also miss out on support this April as they’re not automatically entitled to the Council Tax rebate.

“The chancellor’s approach of funding a reduction in energy bills this year through higher bills over the following five years is also a risky strategy, especially if the cost of gas doesn’t fall soon and sharply. High energy bills could be a feature of the 2020s – emphasising the need to wean Britain off fossil fuels.”

At the end of last week, Ofgem announced it would be raising the energy price - something that’s been driven by a record rise in global gas prices over the last six months, with wholesale prices quadrupling in the last year. 

Off the back of this, the energy regulator’s chief executive Jonathan Brearley said it could double the frequency of which it reviews the energy price cap, moving to every three months rather than the current rate of six months. 

Speaking on BBC Radio 4’s Today programme, he added the move would allow households to “adjust much more quickly”. 

He explained: “What we’re now saying is that we need to look to the future and the difficult news for all of us is that this volatile market might be with us for some time. To do that we’ve got to change our entire regulatory package to make sure the market can better adapt.”

The energy market’s current crisis will be high on the agenda in the Utilities & Telecoms stream at this year’s Credit Summit. To look at the summit’s full agenda, click here.