Energy firms face overhaul of fuel poverty legislation

Energy companies are to be required by law to give a discount on bills to more of their most vulnerable customers. The initiative is part of the Warm Home Discount […]

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Energy companies are to be required by law to give a discount on bills to more of their most vulnerable customers.

The initiative is part of the Warm Home Discount which was announced in the Spending Review and has had further details published today.

The plan is for older, poorer pensioners to receive up to £130 off their electricity bills. Other groups, such as low income families and those with long term illnesses and disabilities, may also receive this discount.

The Department of Energy and Climate Change revealed thatthe new mandatory scheme will replace the previous voluntary agreement with energy suppliers to provide better focused help to vulnerable consumers. Over the four years of the scheme to 2015, the Warm Home Discount will be worth up to £1.1bn and projected to help around two million households per year.

Today a consultation is being launched focusing on the detailed structure of the support scheme, including proposals for who should be eligible for assistance and how they will be targeted.

Energy SecretaryChris Huhne said:”Warm Home Discount does exactly what it says on the tin, in providing money off vulnerable households’ energy bills to help them afford their heating.We’re requiring energy companies to do this by law, but first we need to get the detail right. Warm Home Discount is a practical way to provide tangible financial help on energy bills to more of the most vulnerable.”

The consultation document proposes four key areas of support:

•A core group – this would be the majority of spend from energy suppliers over the four years of the scheme. These are a well-targeted group of the poorest pensioners who have a high propensity to fuel poverty and a higher risk of excess winter deaths.This section of the model would build on the 2010 Energy Rebate Scheme, a successful data matching pilot between the Department of Work & Pensions, DECC and the six major energy suppliers that resulted in an £80 rebate being provided to over 200,000 of the poorest pensioner households this year;

•A broader group – while the core group have a high tendency to be fuel poor, it is recognised that other groups are at risk of fuel poverty.The proposals would therefore also ensure some support will be available for other groups of vulnerable consumers;

•Legacy spend – The voluntary agreement between energy suppliers and government ends in March and the proposals allow suppliers to continue providing these benefits to the customers receiving them for a period of time. These would be transitional arrangements and suppliers would have to manage this spend down over the scheme period and replace it with other more targeted and predictable support;

•Industry initiatives – The proposed model would also recognise good work suppliers have been doing through various industry initiatives under the voluntary agreement, and provides room for them to continue funding them. Such activities include working in partnerships to identify vulnerable customers and funding services delivering energy advice to vulnerable customers.

The Warm Home Discount consultation will close on January 14.

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