The last 12 months have been squandered; we cannot waste the next 12 weeks…
01 September 2022
Stephen Fitzpatrick, Founder of OVO Energy [appeared in the Daily Telegraph on 1st September 2022]
The first warning signs of the European energy crisis emerged last September. By December, 30 energy suppliers had gone bankrupt, and emergency meetings were being held weekly. But a year on, we still don’t have a plan for the winter ahead. The last 12 months have been squandered; we cannot waste the next 12 weeks.
The first order of business for the incoming Prime Minister must be to answer the question that millions of people up and down the country are asking, which is quite simply: 'What are we going to do?' Unfortunately, there is no simpler answer, no silver bullet.
Important and difficult decisions need to be made quickly. Some of these will need to take immediate effect, some in the months and years ahead. But we must start next week, not only with a new government but with a fresh resolve to fix the issues that we have known are broken for a long time.
So what can and should be done? First, we need to act with compassion and recognise that people need help now. That’s why, as a first step, we need to bring forward the Government’s £400 Energy Bill Rebate and pay it in full to households over the next three months. While not a perfect scheme, it’s an existing mechanism which will bring immediate relief.
We support the idea of a ‘Tariff Deficit Fund’ to smooth further price rises, but it needs to be progressive and sustainable over a potentially long period - it cannot be an unlimited, indefinite financial commitment for the state to bear. We advocate for a tapered approach - modelled on the income tax system - whereby everyone receives a limited amount of subsidised energy, above which we all pay the full market price. Thus the poorest households benefit the most, but there would remain a full incentive for us all to reduce our energy consumption where we can. This is a blueprint which could transition into a social tariff over time.
We also need to address the long-standing prepayment poverty penalty. Perversely, those who pay for their energy in advance, who are often the lowest income households, are paying an average additional £60 per year. This is just wrong, and needs to change. Ofgem should lower the price for prepayment customers to make this the cheapest way to pay for energy. We should also abolish the standing charge added to bills to make them both simpler and fairer.
One of the biggest blunders of the last 10 years is how little we have done to tackle energy waste. We have become the world leader in Offshore Wind, an enormous achievement, but we have some of the least efficient housing in Europe. It is less popular with politicians than building nuclear power stations, but improving energy efficiency will save money, improve our energy independence and will create 10,000s of jobs. During the Second World War, the nation helped lower dependence on food imports by growing fruits and vegetables on any spare bit of land they could find. In the same way, we need creativity and fresh ideas to drive a national obsession to insulate everything.
Lastly but maybe most importantly, putting an effective price on CO2 would be the best way of reducing the UK’s dependency on fossil fuels, catalysing the decarbonisation of our economy, and promoting a more progressive energy system. It will tax the profits of big oil and gas companies on an ongoing basis, rather than the one-off gain we would get from a windfall tax. The measure could fund a ‘carbon dividend’ - a revenue stream that could be redistributed to low-income and fuel poor households to support them through the energy transition.
The new prime minister will certainly have an unenviable task. Leaders can’t choose the hand they are dealt, but for most, they at least have some time to build a legacy. Whoever becomes the next prime minister will face an immediate crisis that will shape their premiership. How they act in their first one hundred hours will determine the fate of millions of households this winter, and the shape of the UK economy for years to come.
Much could have been achieved in the last twelve months, but with fresh thinking, new leadership and bold action, it is still possible to keep everyone in Britain warm this winter. But there isn't a moment to waste.