Ofgem chief proposes the launch of social tariff

Jonathan Brearley has said this tariff could limit price volatility for a defined group of customers

Big Zero Report 2022

The boss of the energy regulator has today highlighted the case for “examining with urgency” a social tariff that limits the impact of high energy prices on vulnerable customers.

Ofgem’s Chief Executive has called for a “serious assessment” of a social tariff – a tariff designed to protect vulnerable customers amid extremely high energy prices.

This measure could potentially tackle the “root cause” of the distress that many customers are facing this winter, he said, adding this tariff “would need to be subsidised when prices are high and preferably paid through funds raised in a progressive way”.

Mr Brearley recognised there could be trade-offs involved “that are far beyond the regulator’s power” – for example the definition of the group who would have access to a social tariff.

During his speech at the Institute for Government, Mr Brearley said that some of the practices of the past need to give way to new more ‘flexible’ ways to protect customers and energy companies.

He said the problem the energy industry faces is a combination of an “inflexible price cap” and the pressure rising from volatile energy prices – this increases the financial risks that suppliers face, he said.

Mr Brearley noted that the price cap has proved how effective it is in an energy market that is stable – however, today’s energy environment is “far from stable”, thus what is needed, as he said, is another mechanism that could protect consumers more effectively in a volatile market.

Jonathan Brearley said the level of the price cap might drop faster than previously expected, this might be lower even from the government’s Energy Price Guarantee.

He explained that this development might mean that millions of taxpayers’ money will be saved as there will not be a need to subsidise these schemes.

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