The habits of energy consumers need to be adapted to minimise the pain from rising household prices this year, suggested several industry figures in the energy sector on Utilita’s Energy Bulletin Podcast.
With the price cap expected to increase by as much 50 per cent, raising energy bills for average use to £2,000 per year, Utilita Energy’s (Utilita) founder Bill Bullen argued that any potential savings, such as evolving consumer lifestyle habits should be encouraged.
Bullen said: “Energy usage behavioural change and improving the energy efficiency of housing stock are key. There’s a big opportunity if the right information is there.”
Both other industry voices on the podcast, Jim Garrett, former chief operations officer of failed energy supplier Orbit Energy (Orbit), and Derek Lickorish, chairman of Utilita and former chairman of National Energy Action (NEA), shared Bullen’s view and urged consumers to consider cost-efficient behavioural changes.
Garrett recognised that energy firms such as SSE have been recently criticised for delivering unhelpful advice such as telling customers to do star jumps, wear more clothes and cuddle their pets, but he did encourage consumers to consider cost saving measures that were practical.
He said: “There’s nothing more important right now than personalised information on usage habits and ways to save – it has to be delivered in a way that isn’t patronising.”
Commenting on potential technological innovations, the former chief executive said: “We need to invest in carbon neutral technologies to improve the energy efficiency of the country’s housing stock, but there has to be a focus on those who are least able to make those changes – tenants can’t be ignored – those who don’t own their home need help to improve the energy efficiency of their property.”
Potential measures could include smart meters, increasing insulation, or investing in energy saving items, with Lickorish also encouraging households to invest in heavy curtains, which “will significantly increase the energy efficiency of a home.”
As for potential financial measures, Bullen advocated increasing social support payments in line with inflation rates, which have already reached seven per cent in the US, and that solutions need to be brought in urgently.
He explained: “This will eventually happen, but it will only impact the pocket in April 2023, but the crunch will come in October 2022, so it needs to happen before then to enable heating and eating.”
Lickorish, meanwhile, advocated means testing for winter fuel payments so that more money could be allocated to low-income households while comfortable homeowners would shoulder the costs during the crisis.
He said: “We have a ludicrous situation where all high-rate tax payers over a certain age receive a winter fuel payment, even if they don’t need it. That could change. The sum of money afforded by the Warm Home Discount also needs to increase, and this could be done using the additional VAT revenue that the treasury receives as a result of energy price rises.”
The government is currently mulling over multiple ideas to alleviate rising costs for UK consumers. Current plans under consideration reportedly include expanding the £140 Warm Home Discount to 8.5m households, a £500 direct cash grant, VAT cuts, and full-scale loans to the energy sector.
Government meddling slammed by experts after price-cap driven carnage damages energy sector
In an open letter, Octopus’ chief executive declared his support for energy sector loans to spread costs for households over time.
However, during the podcast, all three industry experts criticised extensive government meddling and potential freshly devised schemes to alleviate the crisis, preferring instead to increase already-existing social spending programmes.
Bullen said: “It’s the involvement of politicians and the Government that has caused the energy industry to be such a ‘mad house’ house at the moment.”
He warned the market was now approaching the status of a “cosy oligopoly”, laying the blame at regulators and the government.
Consequently, he called any proposals to nationalise the energy industry as “allowing the lunatics to take over the asylum.”
Commenting on the reality of rising prices, Bullen added: “You have to let the price signal do its work, and that will make us change our energy behaviours, or make improvements to reduce energy wastage.”
Garrett was particularly critical of the price cap which has aimed to limit consumer costs, echoing former criticisms from think tanks such as the Institute for Economic Affairs about the lack of imagination within the market.
He said: “The price cap has led to failure in innovation in the market. Some of the failed suppliers were making good headway in introducing new features, and that’s bad for everybody.”
Lickorish reserved his criticisms particularly for Ofgem, slating them for trying to “micromanage the industry despite the people micromanaging having never ran a business.”
In particular, he singled out the “incorrect belief” energy companies were ripping off customers which caused them to extend their regulatory oversight of the industry.
This criticism contrasts markedly with both Ofgem’s direction of travel with the chief executive Jonathan Brearley having announced financial stress tests and hedging controls, and criticisms from Citizens Advice.
Rather than meddling in the market, it accused Ofgem of being asleep at the wheel and not regulating poorly run suppliers competently.
However, think tanks such as the IEA have slammed any proposals for further pricing controls, instead calling for the UK to tap into its own domestic supplies in the North Sea and through fracking.