Questions over security of UK energy supply as households exposed to future price spikes - new PAC report
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Government has more to do to convince Parliament of the security of
UK energy supplies. In a report on the support schemes Government
used to reduce the impact of energy bill price spikes, the Public
Accounts Committee (PAC) calls for more attention to be paid to
support for consumers at greater risk of fuel poverty and those
falling behind with their energy bills. Even after the energy price
crisis subsided, the UK had in 2023 the highest electricity bills
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Government has more to do to convince Parliament of the security of UK energy supplies. In a report on the support schemes Government used to reduce the impact of energy bill price spikes, the Public Accounts Committee (PAC) calls for more attention to be paid to support for consumers at greater risk of fuel poverty and those falling behind with their energy bills. Even after the energy price crisis subsided, the UK had in 2023 the highest electricity bills of countries providing comparable data. Millions of people are living in cold conditions during the winter and are cutting back on essential costs such as food, with consumer energy debt at a worrying high. In 2024, over £3.7bn was owed for both domestic electricity and gas, compared with £1.8bn in 2021. Electricity is currently four times more expensive than gas. The report warns that, in the event of a price spike similar to the one during the energy crisis, existing schemes to protect against fluctuations in international gas prices are not sufficient to shield households. While the Department for Energy Security and Net Zero (DESNZ) deserves credit for the way in which it stood up past schemes, the PAC warns that not enough has been done to ensure effective support of vulnerable consumers should there be another price spike. An estimated 238,000 households were pushed into fuel poverty by the crisis. The report finds that low take-up for the scheme supporting households without domestic electricity supplies suggests that it did not reach all those in need. Existing support schemes for the coming winter exclude certain people with disabilities, whose costs can be 25% higher than those without disabilities. The largely universal nature of the £44bn schemes meant some people who did not need the support still received it. Yet despite it being almost three years since the energy price spike, DESNZ is still in the early stages of considering how to focus its schemes more effectively in the future, and would not yet be in a position to provide more targeted support to consumers and so reduce wasteful expenditure. DESNZ is relying on the expansion of renewable energy to reduce bills over time. However, a review of how households might benefit from cheaper rates at certain times has been running for three years and remains on an uncertain timetable. The report also finds that Government action in reducing electricity bills by shifting the cost of environmental levies onto gas bills is still delayed. People who are unable to pay their energy bill often struggle to obtain advice and support from their energy supplier, and the report calls for more to be done to ensure a stronger debt advice service for customers. The PAC is calling on DESNZ to set out how it will make sure there is capacity in the grid when there is low generation from renewable energy during periods of calm weather, including from technologies such as nuclear. The report notes a period in January 2025 when UK energy generation briefly fell below a margin set to ensure demand in the days ahead. This caused speculation around blackouts, and the report calls for improved reporting on how energy supply issues are handled. Sir Geoffrey Clifton-Brown MP, Chair of the Committee, said: “Sharp moves in energy prices in the future must find Government fully prepared to issue targeted and effective support, with those most in need the focus of that support. We cannot see a repetition of precious funds being beamed out across the spectrum to those who do not require help. This approach is all the more important when our report shows some households remain exposed, at a time when the UK's electricity bills appear world-beatingly high and debt weighs down billpayers' finances to an alarming degree. “The Government should be commended for how swiftly it moved to shield billpayers from the depredations of volatile energy markets in recent years. It must now build on and learn from its efforts more quickly, as if past years have taught us anything, it is that volatility is the new normal. The geopolitical outlook remains uncertain, and energy demand is heating up at the same time as we pivot towards greater reliance on renewables. Our report poses unanswered questions as to how future energy security will be assured when the wind doesn't blow and the sun doesn't shine.” PAC report conclusions and recommendations The Department has been slow to learn lessons about how to respond in the event of a future spike in energy prices. The Department deserves credit for the speed at which it provided financial support during the energy crisis. The schemes protected many consumers from the extremes of these price increases and were designed in such a way that the levels of fraud and error in the schemes were comparatively low at an estimated 0.7% (£291.8 million). To inform its future interventions, the Department is relying on the findings of its evaluations of the schemes. However, the final evaluations have been delayed from an expected completion date of Spring 2025 to Summer 2025. Existing schemes like the Winter Support Commitment offer protection to some households against fluctuations in international gas prices, but they are not sufficient to shield households from the full impact should there be a price spike similar to the one during the energy crisis. Recommendation 1: Once its evaluations are finalised the Department should, within 1 month, write to the Committee setting out a summary of the key learnings from its completed evaluation for responding to any future rise in energy prices. The Department would not yet be in a position to provide more targeted support to consumers and so reduce wasteful expenditure. Most of the £44 billion of support was provided through the schemes that were universal in nature, which means that some people who did not need the support still received it, affecting the schemes' overall value for money. The support provided also did not match the support that was needed, as lower-income households received the same level of support as higher-income households. The non-domestic sector faced similar issues, with for example small, energy-intensive businesses struggling to access support which reflected a range of very different circumstances due to the Department's initial poor understanding of the sector. The Department is still in the early stages of considering how combining information, such as from tax systems, which are based on individuals, and energy usage based on household consumption, might support better targeting in the future, despite it being almost three years since the spike in energy prices. Stakeholders are concerned that delays in addressing administrative challenges with data matching will affect the ability for future financial support to reach those consumers who need it most. Recommendation 2: The Department should, by September 2025, set out a plan for how it would be able to target support to both domestic and non-domestic consumers in the future. This should include the actions it is taking to address the challenges with data matching. The Department has not done enough to address the challenges of providing financial support to vulnerable consumers in the event of another crisis. The Department reported that between mid-2022 and mid-2023 the Energy Price Guarantee (EPG) and Energy Bills Support Scheme (EBSS) prevented around 289,000 households in England from going into fuel poverty. However, this was not enough to offset the wider impact of soaring energy prices, which still pushed an estimated 238,000 more households into fuel poverty overall. At the same time, take-up of the scheme supporting households without a domestic electricity supply, such as those in care homes and park homes, was low—only 18.2% in Great Britain and 19.1% in Northern Ireland (of the Department's provisional estimate of eligible recipients). While the Department worked with local authorities on some schemes to identify vulnerable consumers, the low take-up suggests that this approach did not fully reach all those in need. The Department says it channelled funds via social landlords, but gaps in communication and data tracking meant some eligible tenants were still missed. The Warm Homes Discount, an existing support scheme that the Department expects will mitigate high energy prices this winter, excludes some groups who are more exposed to high energy costs like certain people with disabilities whose costs can be 25% higher than those without disabilities. Recommendation 3: The Department should, in time for next winter, develop strategies for providing financial support to consumers at greater risk of fuel poverty. These strategies should consider how to work with organisations with helpful insights, such as registered social landlords. The Department and Ofgem are not doing enough to ensure people falling into debt with their energy bills receive the advice and support they need from their energy supplier. At the same time as energy prices have risen significantly so has the extent to which people have fallen into debt with their energy bills. Consumer energy debt is at a worryingly high level, with £3.7 billion owed by domestic consumers for both electricity and gas in 2024 compared with £1.8 billion in 2021. Millions of people are living in cold conditions and cutting back on essential costs such as food. Many people who are unable to pay their energy bill struggle to receive good, accurate and helpful advice or support from their energy supplier. The Department accepts this is a serious issue and is working with Citizens Advice to look at what can be done to provide a stronger debt advice service to support customers. Ofgem has recently launched a review of service standards and support for people in debt; and the Department has initiated a wider review of Ofgem to ensure that it has the powers to address any poor outcomes for energy consumers. These reviews provide an opportunity to ensure consumers receive better support from their energy suppliers when they face difficulty paying their bills. Recommendation 4: The Department should collect data on how well suppliers are performing in providing advice and support to consumers that struggle to pay their energy bills. The Department should use this data as part of its review of Ofgem, to assess whether it has the information and powers to deal with suppliers that do not provide sufficient advice and support to consumers in debt. We remain concerned that even after the crisis has subsided, UK electricity bills are the highest of the countries providing comparable data to the International Energy Association. The UK had the highest electricity price out of 25 countries reporting both domestic and industrial electricity prices in 2023, (including taxes and levies) and electricity is currently four-times more expensive than gas. Despite repeated promises, the Department has delayed taking action to rebalance energy prices by shifting the cost of environmental levies from electricity to gas. In addition, the Department is reviewing how electricity prices are set for households so that they can benefit from cheaper rates if demand is low or when the weather means more energy is produced. But this review has been running for three years and remains on an uncertain timetable, meaning it is unclear when consumers will start to see the benefits through reductions to their bills. Recommendation 5
The Department has more to do to convince Parliament that it has a robust plan for ensuring security of energy supply to meet increasing demand. The security of energy supply is the highest priority for the Department. Energy demand is set to rise from increasing numbers of electric vehicles and heat pumps, data processing centres, as well as the move to building homes. The stability of the energy grid might be affected by the Department's plans to move towards cleaner power by 2030, because intermittent renewable energy from wind and solar vary according to the weather conditions. Intermittent energy sources will therefore need to be complemented by flexible and baseload power. Nuclear is an important low-carbon form of baseload generation but there are questions around the life and capacity of the existing plants and the time needed to get small modular nuclear reactors up and running. In January 2025, the National Energy Systems Operator issued a routine notification to energy providers to increase supply, after energy generation briefly fell below a margin set to make sure demand in the days ahead was met. It acknowledged, however, that there had been some speculation about the seriousness of the situation. The Department indicated that supply levels had been lower in the past and the system responded effectively to the potential supply issues. But such interventions are not cost free - this response cost £21 million. DESNZ needs to make sure its public reporting of such incidents meets the highest standards of transparency. Recommendation 6
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