People in Scotland have received more than £30 million via two Scottish Government benefits to help them deal with increased energy costs this winter, new statistics have shown.
Winter Heating Payment supports households on low incomes, including older people, disabled people and families with children under five.
Child Winter Heating Payment helps families of the most severely disabled children and young people.
The official figures show more than 400,000 Winter Heating Payments of £55.05 were issued between November last year and the end of March. More than 30,000 Child Winter Heating Payments of £235.70 were made in the same spell.
Winter Heating Payment replaced the UK Government’s Cold Weather Payment in 2023. Most people getting it receive more money on average than via Cold Weather Payment.
People receive Winter Heating Payment whatever the weather, unlike Cold Weather Payment when the temperature needs to drop to a specific level.
Child Winter Payment, introduced in 2020, is not available anywhere else in the UK. There is also no cap on the number of children who can get it in the same family.
Cabinet Secretary for Social Justice, Shirley-Anne Somerville, said: “The £30.2 million paid over the course of winter provides support to those who need it most. It is being paid quickly and effectively to help mitigate the worst of the cost of living crisis.
“Winter Heating Payment guarantees those who qualify will get a payment every year – in contrast to the UK Government approach which needs the weather to be under a certain temperature for a sustained spell.
“Both Winter Heating Payment and Child Winter Heating Payment have recently been increased in line with inflation which means we will be getting more money into people’s pockets in 2024/25. I am pleased that we are getting the vast majority of these payments to people in good time.
“I urge anyone who is struggling during the cost-of-living crisis to visit the Scottish Government’s Cost of Living website for support and advice.”
Tommy Sheppard, MP for Edinburgh East, is calling on the UK Government to take urgent action to extend energy price caps for residents whose homes are heated through district heating.
Residents in Edinburgh East who receive their heat and hot water from district heating have seen eye-watering energy bill increases of more than 500% on unit charges following the UK Government’s Energy Bills Discount Scheme ending at the end of March.
Residents in one newbuild development built in 2019 in Greendykes, built by Places for People, are reporting bills having skyrocketed with some experiencing overnight price increases well in excess of £1200 a year for heat and hot water alone.
The UK Government has repeatedly ignored SNP calls to close a loophole meaning residents getting their heat from district heating sources are not covered by the energy price cap that most households benefit from. The result has been that, following the ending of temporary UK Government support, energy bills for residents and businesses have skyrocketed since April 1st.
Tommy Sheppard MP has written to the UK Government to seek an urgent update on district heating systems being charged at commercial, rather than domestic rates. This has meant residents who are part of district heating schemes fall into a loophole of the UK Government’s energy price cap, meaning price rises for them are not subject to the same controls.
Commenting, Tommy Sheppard MP said: “Residents are worried and rightly angry about the impact of these eye-watering rises. It’s farcical that having done everything right, these residents now face bills well in excess of what they would be paying if they had an individual gas boiler.
“This defeats the entire point of low carbon energy schemes which are essential if we’re to continue to make progress on tackling climate change.
“The UK Government need to urgently bring district heating schemes under the same price protections as the rest of the energy market. It’s not right that energy companies continue to make a killing out of residents purely because of a technicality that the UK Government have been aware of for years and have done nothing to resolve.
“I’m demanding action from UK Ministers. They’ve been asleep at the wheel while residents in my constituency are suffering, they need to fix this now. What’s happening isn’t fair.”
Local resident Claire who has lived in the development for the last 4 years said: “As of the 1st of April my provider has implemented a 500% increase in the price I pay per kWh from 5p to 26p – with no notice to myself or my neighbours.
“I am now facing bills in excess of £200 a month for simple heating and hot water requirements.This has put a huge financial strain on my budgeting, alongside the many other cost of living increases faced today.
“As our home is served by district heating not only are we not protected by any price cap or regulations, we are also trapped to one provider with no option to shop around or swap tariffs, leaving myself and my neighbours forced to find 5 times the money to simply have warm showers and heat our homes.”
Energy regulator Ofgem has today (Friday 23 February, 2024) announced a significant reduction of the energy price cap for the second quarter of 2024.
The price cap, which sets a maximum rate per unit that can be charged to customers for their energy use, will fall by 12.3% on the previous quarter from 1 April to 30 June 2024. For an average household paying by direct debit for dual fuel this equates to £1,690, a drop of £238 over the course of a year – saving around £20 a month.
This will see energy prices reach their lowest level since Russia’s invasion of the Ukraine in February 2022 caused a further spike in an already turbulent wholesale energy market, driving up costs for suppliers and ultimately customers.
However, despite reaching this welcome milestone, Ofgem recognises that the cost of living remains high and many customers continue to struggle with their bills as standing charges rise and energy debt reaches a record figure of £3.1 billion.
Therefore, today Ofgem is also announcing:
Confirmation of the levelisation of standing charges to remove the ‘PPM premium’ previously incurred by prepayment customers.
A decision to allow a temporary adjustment to the price cap to address supplier costs related to increased levels of bad debt.
A decision to extend the ban on acquisition-only tariffs (BAT) for up to another 12 months.
Confirmation of the end of the Market Stabilisation Charge (MSC) from April 1.
A decision not to change wholesale cost allowances following a review conducted in late 2023.
Jonathan Brearley, CEO of Ofgem, said:“This is good news to see the price cap drop to its lowest level in more than two years – and to see energy bills for the average household drop by £690 since the peak of the crisis – but there are still big issues that we must tackle head-on to ensure we build a system that’s more resilient for the long term and fairer to customers.
“That’s why we are levelising standing charges to end the inequity of people with prepayment meters, many of whom are vulnerable and struggling, being charged more up-front for their energy than other customers.
“We also need to address the risk posed by stubbornly high levels of debt in the system, so we must introduce a temporary payment to help prevent an unsustainable situation leading to higher bills in the future. We’llbe stepping back to look at issues surrounding debt and affordability across market for struggling consumers, which we’ll be announcing soon.
“These steps highlight the limitations of the current system – we can only move costs around – so we welcome news that the Government is opening the conversation on the future of price regulation, seeking views on how standard energy deals can be made more flexible so customers pay less if using electricity when prices are lower.
“But longer term we need to think about what more can be done for those who simply cannot afford to pay their energy bills even as prices fall. As we return to something closer to normality we have an opportunity to reset and reframe the energy market to make sure it’s ready to protect customers if prices rise again.”
Affordability remains the most significant issue, as people continue to struggle with bills over the last two years, which has led to record levels of energy debt.
To address this challenge in the short-term, Ofgem will allow a temporary additional payment of £28 per year (equivalent to £2.33 per month) to make sure suppliers have sufficient funds to support customers who are struggling.
This will be added to the bills of customers who pay by direct debit or standard credit and is partly offset by the termination of an allowance worth £11 per year that covered debt costs related to the Covid pandemic.
Prepayment meter (PPM) customers will not be impacted by the extra charge, reflecting the fact that many do not build up the same level of debt as credit customers because they top up as they go.
Ofgem also confirmed plans to maintain the equalisation of standing charges across payment methods so that customers are not charged more depending on the payment method they use.
Since October 2022 the so-called ‘PPM premium’ was removed by government support via the Energy Price Guarantee. However, with that support coming to an end on April 1, Ofgem has taken steps to provide a lasting solution, which must be funded by bill payers rather than tax payers, to maintain fairness in the system.
This means PPM customers will save around £49 per year while direct debit customers will pay £10 per year more.
Increasing network costs has also contributed to the rise in standing charges – and in anticipation of this we published a call for input in November 2023 and are currently reviewing more than 40,000 responses.
Today Ofgem is also publishing a decision to extend the ban on acquisition-only tariffs (BAT) for another 12 months, but intends to open a consultation to consider shortening this extension to just six months.
The BAT was introduced in April 2022 to provide more stability at the height of the energy crisis, removing often risky short-term discounted tariffs intended to attract customers from other suppliers.
As competition returns to the market, Ofgem is encouraging rising numbers of customers switching with a number of measures, including shortening the time suppliers are given to complete a customer transfer from 15 days to just five.
Additionally, from 1 April, the Market Stabilisation Charge – introduced in tandem with the BAT – will come to an end, meaning suppliers are no longer required to compensate a new customer’s previous supplier when they switch.
This influenced the regulator’s decision to temporarily extend the BAT rather than remove both safeguards at the same time, ensuring a phased and responsible return towards normality in the market while preventing a return of the risky behaviours which contributed to the high number of supplier failures during the energy crisis.
Ofgem is also publishing a decision following its wholesale adjustment review. Following unusually high volatility in wholesale prices between October 2022 and September 2023, the regulator examined whether suppliers experienced differences between wholesale costs and the allowances they were allowed to recover via the price cap.
However, after careful consideration the regulator has concluded to take no further action as wholesale costs did not systematically differ from allowances.
Citizens Advice Scotland has responded to today’s announcement by Ofgem, setting the energy price cap at £1,690.
The charity is stressing that even though prices are coming down they are still way too high for many households.
CAS Social Justice spokesperson Matthew Lee said:“Today’s announcement has to be seen in the context of peoples’ incomes and how badly households have been battered by the cost-of-living crisis of the past 18 months.
“Even if prices are coming down they are still way too high for many people to be able to afford, particularly the many who have had to go into debt to cover their energy costs since the price surge in 2022.
“It’s important that we don’t become complacent about the lower cap. The fact is that too many people are still struggling to pay these bills, and more targeted financial support like a social tariff is needed for the most vulnerable households.”
Previous CAS research on energy affordability has found that:
Nearly 3 million people report switching the heating off when it’s cold, wrapping themselves in blankets and extra layers instead.
1.4 million people regularly sit in the dark, with no TV or laptop/tablet on, to save on energy bills.
Nearly 3 million people in Scotland have cut back on food as a result of rising energy bills.
Tens of thousands of people in Scotland have been forced onto pay as you go energy meters against their will.
Over 300,000 people say they are concerned about energy debt.
In December the average energy debt for people seeking complex debt advice was £2,307 – up nearly £500 compared to the same time last year.
185,000 people say they have changed their bathing habits to save on hot water – they’re sharing bathwater or showering at work or at the gym.
Energy regulator Ofgem has today (Thursday 23 November, 2023) announced the energy price cap for the first quarter of 2024.
The price cap will increase by 5% on the previous quarter from 1 January to 31 March 2024. For an average household paying by direct debit for dual fuel this equates to £1,928, a rise of £94 over the course of a year – around £7.83 a month. The price cap, updated every quarter, sets a maximum that can be charged to customers for energy bills.
Ofgem’s priority is to protect consumers and ensure that they pay a fair price for their energy. Today’s price increase is driven almost entirely by rising costs in the international wholesale energy market due to market instability and global events, particularly the conflict in Ukraine.
The regulator will continue to use all levers available to ensure costs are spread fairly and customers struggling with bills are supported. It has today further developed plans to permanently remove the so-called ‘prepayment meter premium’ to ensure that prepayment customers are charged the same standing charge as direct debit customers. Ofgem has already launched a ‘Call for Input’ on standing charges running until 19 January, 2024.
Jonathan Brearley, CEO of Ofgem, said: “This is a difficult time for many people, and any increase in bills will be worrying. But this rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay.
“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.
“We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap.
“People should weigh up all the information, seek independent advice from trusted sources and consider what is most important for them whether that’s the lowest price or the security of a fixed deal.”
Ofgem recently set out new rules for suppliers making clear that they should be prioritising enquiries from vulnerable customers who need help and proactively reaching out to households if they miss two monthly or one quarterly payment, check to see if they are struggling with bills and, if so, offer support such as affordable payment plans or, if appropriate, repayment holidays.
The regulator has also taken robust action to raise standards of customer service and worked in conjunction with suppliers and consumer groups to encourage industry to support those struggling with their bills, including the Winter 2023 Voluntary Debt Commitment recently announced by Energy UK and Citizens Advice.
A Statutory Consultation on levelling standing charges for prepayment meter and direct debit customers so customers pay the same daily charge has been published today.
Previously, customers on prepayment have been charged more than those who pay by direct debit to cover the additional costs and resources required by suppliers to provide their services.
In October 2022, the government introduced measures to temporarily remove this ‘PPM premium’ via the Energy Price Guarantee, which remains in place until April 2024.
Following a consultation this summer, Ofgem is now proposing an enduring solution that would ‘levelise’ these standing charges to coincide with the end of that government support. This consultation also sets out proposals to share the costs of bad debt more equally across customers to reduce the premium paid by standard credit customers (those who pay on receipt of a monthly or quarterly bill for the exact amount of energy used).
Under the terms of the regulator’s proposal, this would save PPM customers around £50 a year, reduce Standard Credit bills by around £45 a year but add around £20 a year for direct debit customers. Ofgem is keen to hear views on this proposal from all interested parties.
This follows the launch of a wider conversation on the issue of standing charges last week and how they should be set, which has already attracted a high number of responses in the first week of the consultation.
In response to today’s Ofgem energy price cap announcement, Joanna Elson CBE, Chief Executive of Independent Age said: ““Today’s energy price cap announcement offers little reassurance for older people in financial hardship, with bills still 85% higher than before the energy crisis.
“We speak to people in later life who are living in one room because they can’t afford to properly heat their home, those who risk falls because they aren’t turning on the lights, and older people who are in thousands of pounds of debt to energy suppliers. They urgently need help.
“With average energy prices having close to doubled in recent years, coupled with rocketing household costs such as water, food and broadband, those on a low income have endured several years of sky-high costs from all angles. Older people in financial hardship are especially vulnerable to sharp price increases, as many are on a fixed income. The extra money simply isn’t there.
“The UK Government needs to announce financial support now to help the most financially vulnerable, including those in later life, get through this winter. After that, we need a long-term solution to protect against the impact of continuing high prices, including energy.
“Our evidence shows an energy social tariff would offer more stability to older people on a low income and make sure no one is forced to make dangerous choices. This must be something the UK Government consults on.”
The next quarterly price cap announcement will be announced in February 2024, covering April – June 2024.
Consultation on new benefit to help with fuel costs
Views are being sought on the introduction of the Pension Age Winter Heating Payment, a new benefit to replace the UK Government’s Winter Fuel Payment in Scotland.
The Scottish Government has previously committed to delivering the new payment on a like-for-like basis with the existing benefit. It will help more than a million pensioners with heating costs in the winter.
The consultation document sets out proposals for implementing the new payment when it is introduced from the winter of 2024 and asks for responses, which can be submitted until 15 January.
The public’s views on issues such as who should be eligible, the timing and format of the payment and the likely impact of the benefit, are being sought – as well as further evidence about issues specific to people who are off the gas grid.
Social Justice Secretary Shirley-Anne Somerville said: “Pension Age Winter Heating Payment will seek to safely and securely transfer responsibility for the delivery of Winter Fuel Payment to the Scottish Government, ensuring that more than a million pensioners currently eligible for Winter Fuel Payment continue to receive this support.
“This will be an investment of around £180 million in 2024-25 to help older people with the costs of heating their homes throughout the winter.
“Working with individuals and organisations with experience of the benefits system is central to our approach to developing the devolved social security system in Scotland.
“We are now looking for the public’s views, as well as those of relevant experts and organisations – through this consultation – to finalise our policy on this important benefit.”
Energy regulator Ofgem has today (Friday, 25 August, 2023) announced a further reduction in the energy price cap for the last quarter of 2023 (Oct to Dec).
The change will bring the average dual-fuel energy bill below £2,000 a year for the first time since April 2022, saving households an average of £151 on the previous quarter.
From 1 October – 31 December, the cap will be set at an annual level of £1,923 for a dual fuel household paying by direct debit based on the current typical domestic consumption values (TDCV) rate.
Direct Debit
Prepayment
Standard Credit
Economy 7 (electricity only Direct Debit)
July – Sept 2023 cap
£2,074
£2,077
£2,211
£1,400
Oct – Dec 2023 cap
£1,923
£1,949
£2,052
£1,298
The drop, the lowest level since October 2021, reflects further falls in wholesale energy prices, as the market stabilises and suppliers return to a healthier financial position after four years of loss making.
Ofgem is clear that it expects all suppliers to continue improving customer service, to support their most vulnerable customers and to shore up their financial resilience to prevent the kind of failures we saw two years ago. Ofgem recognises that there is some excellent best practice across the sector but expects this to be the norm with poor practice stamped out.
Alongside changes to the price cap, Ofgem has also introduced measures to reduce costs for prepayment meter customers and ensure extra support for those facing disconnection from the network.
The price cap savings – which can be passed on more quickly to customers thanks to the price cap updating quarterly – continues the downward trend since prices peaked at £4,279. However, it remains well above the average before the energy crisis took hold in 2021 and the market remains volatile.
Jonathan Brearley, Ofgem CEO, said: “It is welcome news that the price cap continues to fall, however, we know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter.
“That’s why we’ve introduced new measures to support consumers including reducing costs for those on pre-payment meters, and introducing a PPM code of conduct that all suppliers need to meet before they restart installation of any mandatory PPMs.
“There are signs that the financial outlook for suppliers is stabilising and reasonable profits are returning. With the small additional allowance we’ve made to Earnings Before Interest and Tax (EBIT), this means there should be no excuses for suppliers not to be doing all they can to support their customers this winter, and to reinforce this we’ll be introducing a consumer code of conduct which we will look to have in place by winter.
“This code will ensure there are clear expectations of supplier behaviours especially for their most vulnerable consumers with whom suppliers should be reaching out proactively, with compassion and understanding. There are great examples of suppliers already doing this but I want to see this become the norm in such an essential sector that has such a big impact on people’s lives.”
Ofgem understands that while suppliers cannot control wholesale prices or fix the wider cost of living pressures hitting their customers, now the market has stabilised, they must continue improving customer service and ensure that support across the board is accessible, responsive and understanding, including giving time to make pay arrangements and directing customers to further support and advice. They must also invest in strengthening their financial resilience to protect consumers against the cost of supplier failure.
Additionally, while still low by pre-crisis levels, we are starting to see more and more competitive fixed deals coming onto the market and levels of switching are slowly increasing.
With a lower price cap and reasonable profits starting to return, there is an opportunity for this to continue to grow. Anyone considering fixing should weigh up all the facts and consider what is most important to them, whether that’s the lowest price, or the certainty of knowing exactly what they will pay each month.
It’s important customers are comparing fixed deals with the new, lower price cap announced today. Suppliers are expected to ensure they are transparent in releasing all tariff information to enable consumers to make simple comparisons of the deals available to them across the market.
While the price cap has protected households from the full extent of volatility and surges in wholesale prices over the last two years, it was originally introduced by the Government to protect the minority of consumers who did not switch rather than to cover the vast majority of consumers, as it does now.
It is a blunt tool and in the current market it has costs and as well as benefit. It’s important to look at alternative models to examine whether they could work better with the current volatile market and the move to net zero.
Ofgem has also today published:
A Final Decision to raise the Earnings Before Interest and Tax (EBIT) allowance by £10 per customer per year. Most of this increase is to cover Renewable Obligations ringfencing so that customers’ money is protected in the event of a supplier failure.
Removal of the temporary RO ringfencing allowance, worth £8 per customer and covered by the additional EBIT costs above
A new sliding scale for EBIT meaning if prices surge, the EBIT allowance reduces as a percentage preventing suppliers from making excessive cash gains from a high price market
Final decision on the allowance for additional support credit (ASC) bad debt costs – a new allowance to help ensure some of the most vulnerable consumers remain on supply this winter
Implementation of UNC840 in the cap, reducing the PPM premium
Price Cap model technical changes Final Decision
Levelisation Policy Consultation
By raising the EBIT allowance, Ofgem is taking the next step in its drive to make the retail energy sector more resilient, as we move into another difficult winter when price volatility remains a risk.
At the height of the energy crisis around 30 suppliers failed because they did not have enough capital in the reserve to stay in business – and the cost was shared among all energy consumers, adding £83 to bills.
With suppliers only now starting to recoup a portion of their multi-billion pound losses over the past four years, a small increase in permitted profit margins will allow companies to better cover their costs, attract investment and retain financial stability protecting consumers into the future.
Raising the EBIT allowance from its current rate of 1.9% to 2.4% from 1 October will involve an average £10 increase in bills per year. £8 of this will cover costs to consumers incurred by an additional requirement of suppliers to ringfence enough funds to cover their Renewable Obligations, protecting consumers from additional costs should a supplier go bust.
The EBIT rate, which is well within international norms for energy retail profits and lower than most other business sectors in Britain, will also be altered from a ‘flat rate’ to a more flexible model that tracks the price cap level and tapers as low as 1.75% in the event of another price surge in the wholesale market. This would prevent suppliers from making excessive cash profits in a high-cost market.
Strengthening the commitment to supporting struggling and vulnerable consumers, Ofgem is also reducing the cap for prepayment meter (PPM) customers by £51 per year through an updated approach to calculating the costs of unidentified gas, approved in April this year.
Using some of the benefit from this change, the regulator is now able to introduce an initial 12-month allowance to cover increased debt costs associated with Additional Support Credit that is offered to PPM customers, often at the point of disconnection. This new allowance will help ensure some of the most vulnerable consumers remain on supply this winter.
Longer term, Ofgem seeks to permanently end the PPM premium, where prepayment customers are charged more than those who pay by direct debit to cover the additional costs and resources required by suppliers to provide energy via PPM. A consultation is underway with an aim to ‘levelise’ these standing charges by April 2024 to coincide with the end of government support currently in place via the Energy Price Guarantee.
Morgan Vine, Head of Policy and Influencing at Independent Age said: “Today’s Price Cap announcement offers little comfort to older people living on a low income and struggling to get by.
“Our helpline is continuing to hear from people in later life in financial hardship who have been forced to make sacrifices to pay their bills, including eating one meal a day, washing themselves in freezing cold water, and risking falls by not turning on the lights at night.
“Gas unit costs are still well over double what they were in winter 2020/21 and electricity unit costs are up by over half. The fixed incomes of older people in financial hardship simply cannot keep up with these increases. Long term solutions to protect the most financially vulnerable from high energy prices are desperately needed.
“We’re calling on the government to introduce an energy bills social tariff for those in greatest needed, including people over 65 on a low income and those who have high energy consumption due to illness.
“This long term and sustainable solution would offer some protection to people in later life living on low incomes, so they aren’t forced to make dangerous choices now, and as we approach the winter. “
The next quarterly price cap announcement will be in November 2023, covering January – March 2024.
First Minister announces increased support for households with energy costs
Up to £30 million will be made available through the Fuel Insecurity Fund next year to help households who are at risk of self-rationing or self-disconnecting their energy use, First Minister Humza Yousaf has announced.
The funding will be made available to third sector organisations in the next financial year to support the most vulnerable households in Scotland.
The Scottish Government had previously committed to doubling the Fuel Insecurity Fund, from £10 million to £20 million.
Previous funding has been provided to third sector organisations including the Fuel Bank Foundation, Advice Direct Scotland and Scottish Federation of Housing Associations to provide direct support to households.
First Minister Humza Yousaf said: “I have said my immediate priority is to do everything we can to protect every Scot as far as possible from the harm inflicted by the cost-of-living crisis.
“That is why, in one of my first acts as First Minister, I can confirm today that we will build on our commitment to double the Fuel Insecurity Fund from £10 million to £20 million – to now triple it to £30 million for 2023-24.
“In a country as energy rich as Scotland, we should not have people living in fuel poverty. My government will renew and redouble our efforts to lift people out of poverty, to make work fair, to make our economy work for the people.
“With energy bills still at historically high levels and the UK Government’s Energy Bills Support Scheme being withdrawn from 1 April, over the next year our Fuel Insecurity Fund will continue to be a vital lifeline for many struggling households in the country.
“It is of course only as a result of the UK Government’s mismanagement of the economy and the cost of living crisis that we are having to take this action. This Scottish Government will always put the interests of the people of Scotland first.”
Save the Date: November 4, 2023
Where: McDonald Library, The Nelson Hall
Address: 2-8 McDonald Rd, Edinburgh EH7 4LU
