Social energy tariffs explained

Thursday 25th July, 2013 By Martin Fagan
Social energy tariffs explained

To help their most vulnerable customers cope with the rising costs of gas and electricity, all energy providers have to offer social tariffs.

Fuel bills have soared over the last few years and they've become one of the biggest expenses for the vast majority of households.

According to independent switching service, the average fuel bill is currently £1,252 a year, with every chance rising energy prices over the winter will increase bills further, leaving many UK households under the threat of fuel poverty.

The Department of Energy & Climate Change (DECC) says a household is in fuel poverty if it needs to spend more than 10% of its after-tax income on fuel to maintain a satisfactory heating regime (usually 21 degrees Celsius for the main living area, and 18 degrees Celsius for other occupied rooms).

The DECC estimates that around four million households - 18% of the UK's population - are in fuel poverty and Citizens Advice reports a 46% increase in the numbers of people contacting the Bureaux with fuel debts.

So by definition, anyone earning below £16,000 a year and who likes to keep warm during the winter months is likely to be living in fuel poverty. As well as people who are "fuel poor" on low incomes, there's the elderly, infirm and disabled as well as those on benefits. It's also at these people that social energy tariffs are aimed.

What is a social energy tariff?

It's generally a term used for a special rate offered to vulnerable people who have difficulty paying for the gas and electricity they need. Energy regulator Ofgem's rules state that to qualify as a social tariff, the price charged has to be at least as cheap as any other payment arrangements, regardless of the method used to make the payment.

Working with the government, Ofgem insists that the "big six" energy suppliers - British Gas, EDF Energy, E.ON, npower, SSE, and Scottish Power - all make funds available for their social tariff programme. According to Ofgem, energy suppliers' collective expenditure for 2010-11 was £178.7million, exceeding the government's target by almost £29million.

Ironically, with social tariffs, it's households who have pre-payment meters that often save the most. The best energy deals are not available to people with prepayment meters, but a social tariff means they get the same discount as someone paying on-line or by direct debit.

However, the eligibility criteria for social tariffs vary between utility providers and so one provider might look at your circumstances and sign you up, while another energy company might turn you down.

Energy suppliers' eligibility criteria

The following is a rough guide only to what each of the "big six" energy suppliers offer as social tariffs and the eligibility to sign up for them. This is just a brief summary, so if you feel you go some way to meet the eligibility of an energy company's social tariff, it's probably worth contacting them direct for more details.

Many of the social tariffs offered by the "big six" have very similar eligibility criteria and, broadly speaking, the details outlined below for British Gas are not dissimilar the other five major suppliers.

British Gas offers the Warm Home Discount Scheme (WHDS) which offers eligible customers a one-off payment on their electricity bill. For Winter 2013/14, this will be £135. It used to call its social tariffs Essentials Combined and Energy Trust, but these schemes have been superseded by the WHDS.

The WHDS separates eligible households into two groups - the "Core" group and the "Broader" group. Basically, the "Core" group are aged 80 and under and receiving only the Guarantee Credit element of Pension Credit (no Savings Credit), OR aged 80 and over and receiving the Guarantee Credit element of Pension Credit (even if they get Savings Credit as well).

The "Broader" group includes those in receipt of one of the following means tested eligible benefits: income-related employment and support allowance (including Support element), income-based Jobseekers' Allowance or Income Support.

Another key group for eligibility are the fuel poor - those households with an annual income of less than £16,190 who spend 10% or more of their household annual income on fuel for adequate heating.

The WHDS can also be offered to households where there is an "element of vulnerability" such as mental or physical disability or illness.

EDF offers Energy Assist, which provides all customers with prices equal to fixed amount Direct Debit discounts (6% of total bill) - regardless of how they pay their bill. Energy Assist also features an additional unit rate discount of up to £78.75 for Dual Fuel customers (£39.38 per fuel inc. VAT).

StayWarm from E.ON offers fixed price energy for 12-months with nothing extra to pay, giving peace of mind that households won't receive any surprise bills. The price quoted on the contract is guaranteed not to change for 12 months, even if you use more energy than E.ON estimated or the wholesale price of gas increases. E.ON says this concept is unique to the UK energy market.

But what of social tariffs offered by npower, SSE and Scottish Power? Well, here's the confusing part...

The confusing part

There is currently some confusion about the longevity of the various social tariffs offered by the "big six" providers. This is because there is pressure from government for all the "big six" to sign up for the Warm Homes Discount Scheme.

If you're looking for a social tariff, there are advantages and disadvantages to this. The advantage is that if all the "Big Six" offers the same deal with the same eligibility criteria, then you don't have to switch supplier to sign up for it.

The disadvantage is that if every energy supplier is offering the same deal, there is no competition and no incentive for one supplier to offer a more generous social tariff than its competitors.

There is also some confusion about whether or not suppliers are phasing out their social tariffs.

As well as British Gas' discontinuing its Essentials Combined social tariff, npower's Spreading Warmth Tariff, Scottish Power's Fresh Start Tariff and SSE's Energycare Plus tariff have now all been closed to new applicants, while existing customers on these tariffs are being moved on to the Warm Home Discount Scheme.

If you don't ask, you don't get

Because the social tariff scheme is the energy companies working in tandem with the government and the energy regulator Ofgem, things can change on a political whim. But it looks certain that the government will still insist the big energy companies offer some form of discount to the more vulnerable in society, as withdrawing social tariffs would produce an outcry that would be a potential vote-loser.

So if social tariffs still confuse you but you think you may be eligible, contact your energy supplier and discuss it with them. If you don't ask, you won't get.

All energy companies, big and small, have a duty of care to customers who may be vulnerable with regards to any aspect of their energy supply, so you should receive a sympathetic ear.