Households urgently need more support from the Government with energy bills, MPs warn

The House of Commons Business, Energy and Industrial Strategy Committee, which is behind the wide-ranging report on the energy market, also called for a prompt review of the costs and benefits of the energy price cap, which is due to rise another 65% in October, taking typical bills to £3,240 a year.

The publication of the report comes just days after MoneySavingExpert.com (MSE) founder Martin Lewis issued a stark warning to Conservative party leadership candidates that urgent action was needed on energy bills to avoid a "national financial cataclysm". See Martin's Nine energy need to know NOWs and our Cost of living help to try to protect yourself if you can.

Current support package 'is not enough' given new energy price predictions 

Former Chancellor Rishi Sunak announced a range of support measures to help with the cost of living crisis in May, including a £400 non-repayable energy bill reduction for all households in England, Scotland and Wales connected to the electricity mains, to be paid starting in October.

At the time of that announcement, the price cap was predicted to rise from £1,971 a year to £2,800 a year on typical use – but it's now expected to rise to £3,240 a year. As a result, the Government's May 2022 package is "no longer sufficient", the committee said – something Martin has also warned. 

It added that the impact of the energy price crisis on households is "ongoing and severe", and likely to cause an "unacceptable" rise in fuel poverty and hardship this winter unless more is done. In particular, the committee called for the Government to:

• Immediately update its support package. The committee said this should be targeted at those on low incomes, who are fuel poor and in vulnerable circumstances.

• Reduce costs for prepayment customers. Currently, the price cap for "pay-as-you-go" energy users is £46 a year higher than the one for direct debit customers. The committee said this was "unacceptable" and needs to be addressed. It added that the Government should also look at whether standing charges are appropriate for prepayment customers.

• Help households in financial difficulty repay their energy debt. This could be done by the Government topping up contributions households make through the "Fuel Direct" scheme. Fuel Direct is an existing budgeting scheme which lets people on certain means-tested benefits pay off their debt and ongoing energy use directly from their benefit payments.

• Make sure tenants and legacy prepayment meter users can benefit from the £400 energy bill discount. Charity Citizens Advice raised concerns that up to 585,000 tenants who pay energy bills as part of their rent wouldn't benefit from the reduction, as landlords aren't required to pass on the saving – the committee said safeguards should be put in place to deal with this.

  It added that vouchers were also not the best way to deliver the help to legacy prepayment users – something MSE had also raised concerns over – suggesting negative standing charges instead.

Other key recommendations from the report

As part of its wider investigation into the energy market, the full report also made several other recommendations to energy regulator Ofgem and to the Government, including calls to:

• Review the "supplier of last resort" process that kicks in when an energy firm goes bust. Citing our survey which found delays with credit balance refunds and other issues plaguing thousands of customers, the committee said the process of transferring customers to a new supplier should be reviewed to make sure these problems don't crop up again.

• Consider introducing a "social tariff" for the most vulnerable. This would replace the price cap, and see much lower prices in the long term for those who can't switch. The committee quoted Martin's evidence on this point, and noted that this should only happen once the current crisis is over, as the price cap is currently protecting consumers from even higher costs. 

• Improve how Ofgem works and how it's run. The committee said Ofgem had "proved incompetent" in its role as regulator of the energy market and suggested a raft of improvements, including more regular reporting on its work and more training for its staff.