The chief executive of the UK’s third-largest energy supplier, Ovo Energy, has called on the government to introduce a ‘graduated’ scheme for energy bills that would provide more support for poor households but less for users wealthier, similar to the British tax system.
The proposed strip energy subsidy is part of a 10-point plan put forward by Stephen Fitzpatrick, whose energy company serves 4.5 million customers.
This would reduce 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 prioritize support for poorer customers, as higher-income households typically use more energy, he said.
The proposal is a variant of the “deficit tariff system” already backed by energy companies including Scottish Power, which would involve freezing prices at current levels and covering the difference through a central fund repaid over several years.
“The magnitude of the shock from the recent price hike this winter threatens to tip the economy into a deep recession and will be catastrophic for millions of low-income households,” Fitzpatrick said Thursday. “It’s only fair that we find ways to smooth out further short-term price increases.
“But this regime cannot be open and unlimited. It should be progressive, just like the tax system,” he said.
Fitzpatrick said there would be exceptions, as some vulnerable customers, such as those with home medical care, would use more power. However, those customers should be identified by the energy poverty task force and helped with targeted support, Fitzpatrick added.
Overall, his proposed program would also encourage people to reduce their energy consumption, the energy boss said.
His proposal comes just days after Ofgem announced the energy price cap would rise by 80% from October, taking the average gas and electricity bill from £1,971 to £3,549 per year.
Speaking to Sky News about energy prices during a visit to the United States, Chancellor Nadhim Zahawi said he was working with energy companies and non-governmental organizations to ensure that households in difficulty obtain financial assistance. “Nobody should be cut off because they can’t afford to pay their bills,” he said.
He acknowledged that the current level of government support would not be sufficient, but stressed that his team was considering a range of options for the next administration, widely expected to be led by Conservative party candidate Liz Truss.
“There is nothing on the table. We’re looking at all the options: everything from the chief executive of Scottish Power talking about help where maybe we need to set up some sort of fund so companies can continue to help their customers, to making sure we’re targeting the aid both on households and on small and medium-sized businesses and probably on some large businesses.
“One of my concerns is the scarring effect on the economy if perfectly viable businesses in hospitality, leisure, energy-intensive businesses actually suffer or cease to exist because of the use energy by Putin as a weapon,” he said.
The Chancellor added that he was also working with the Bank of England to provide better liquidity in the wholesale energy market, in the hope that this would lower the energy price cap by £400-500. .
Ovo Energy chief calls for ‘progressive’ billing regime similar to tax system