By Nicholas Earl
The boss of Ovo Energy has called for a “progressive” support package to ease household energy bills, similar in design to the country’s income tax system.
Stephen Fitzpatrick, chief executive of the UK’s third largest energy supplier, has argued energy bills should be eased in a way that would see poorer households be offered more support than wealthier households.
This would involve reducing the price of energy, but only for a limited amount of use per household – meaning energy consumption beyond that level would be charged at a higher price.
The scheme would aim to prioritise support for low-income energy users, since higher-income households typically use more energy.
Fitzpatrick told The Guardian that the scale of the shock from the latest price cap hike “threatens to tip the economy into a deep recession and will be catastrophic for millions of low income households.
He argued it was essential that the Government and energy sector looked for ways to smooth further price increases in the short term.
Fitzpatrick said: “This scheme can’t be open-ended and unlimited. It should be progressive just like the tax system.”
In his view, the energy crisis had to be the first issue of the day for the new Prime Minister, when they are announced next week on September 5.
Ovo’s proposal is a variation of the “deficit tariff scheme” which was first proposed by Scottish Power, and has since won the support of multiple energy firms including Octopus Energy and EON UK.
It involves freezing prices at current levels and cover the difference through a central fund repaid over a number of years.
The announce follow EDF unveiling an ambitious four-stage plan to ease household bills including former Chancellor Rishi Sunak’s announced £15bn support package and a later price cap freeze.
Last month, Ofgem announced the latest update to the energy price cap – which will climb to £3,549 per year in October, 80 per cent higher than its current rate.
The push for a banded energy subsidy is part of a 10-point plan put forward by the energy firm, which serves 4.5m customers.
This includes short-term policies such as bringing forward the energy rebate to be paid in full before Christmas, while in the longer term Ovo favoured measures such as reforming pre-payment fees, a ramp up of insulation and a carbon tax.
Meanwhile, the energy firm has announced its own £50m customer support package to help the most vulnerable this winter
This will be open from October, and will be targeted to help customers with a real and immediate needs.
The £50m package includes payment holidays for debt repayment for all prepayment meter customers so that every penny on the meter will go towards heating, rather than paying back debt this winter
It will also feature a 200 per cent increase in emergency top-up credit for customers on a prepayment meter and continued commitment to never disconnect a custome
The energy firm has also announced a new charity partnership with the Trussell Trust to support food banks to meet increased need this winter – in addition to continued partnership with StepChange.
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