Ovo Energy boss proposes plan to stave off household bill crisis

The boss of the UK’s third largest energy supplier has proposed a plan for the government to subsidise soaring gas and electricity bills.

Ovo Energy founder Stephen Fitzpatrick said under the scheme the poorest households would get the most support.

Higher earners would see the amount of help taper off as they used more energy.

The government said it was preparing to deliver any extra support as soon as a new prime minister is in place.

Mr Fitzpatrick said action was needed now before the winter, otherwise the poorest households would be cold and hungry.

A typical household gas and electricity bill will rise by 80% to £3,549 a year from October, the regulator Ofgem announced on Friday.

Mr Fitzpatrick, the founder and chief executive of Ovo, which has 4.5 million customers, has published a 10-point plan to address the crisis.

A key proposal in the plan is to allow energy firms to borrow from a government-backed fund, and then use the money to subsidise bills.

A similar proposal by Scottish Power to freeze energy bills for all at their current level was dismissed by the Treasury for giving the same relief to richer and poorer households.

Under Mr Fitzpatrick’s plan, everyone would get some assistance, but higher earners would see the amount of money received reduce, the more energy they used.

This is a similar way to how the tax system works, with a tax-free allowance and increased levels of taxation for those on higher incomes.

Short-term plans

Medium-term plans

Long-term plans

Mr Fitzpatrick is also urging the government to bring forward existing support measures.

Currently all households will see £400 knocked off bills over a six-month period starting from October, with households on qualifying benefits getting an additional £650.

Mr Fitzpatrick argues those payments should be made in full before Christmas.

He said the higher charges faced by pre-payment customers amounted to a poverty penalty and should be abolished.

Mr Fitzpatrick also advocates abolishing the standing charge – which customers pay regardless of their energy use.

Tory leadership candidate Liz Truss – who pollsters have tipped to win the contest – hinted on Wednesday she would look at providing further support to businesses and households. She also ruled out energy rationing – unlike rival Rishi Sunak, who said it should not be taken off the table.

Separately, the Resolution Foundation has published a report which says typical household disposable incomes are on course to fall by 10%, or £3,000, over this year and next – “the deepest living standards squeeze in a century”.

The think tank also said the number of people living in absolute poverty was set to rise by three million to 14 million people in 2023-24. Absolute poverty is when household income is below the level necessary to meet basic living standards in terms of food, housing and healthcare costs.

A review by the UCL Institute of Health Equity (IHE) has suggested growing up in cold homes will have “dangerous consequences” for many children now and into adulthood.

IHE director Professor Michael Marmot warned thousands of extra deaths could occur and the health and development of up to 10 million children could be affected directly or indirectly.

Mr Fitzpatrick said helping low income families with energy bills “has to be the first order of business” for the new Conservative leader.

He said: “If we don’t use every available moment over the next 12 weeks to solve this, we are going to see a winter like never before with people going hungry and going cold and the NHS being overwhelmed by the health impacts of the energy crisis.”

A spokesperson for the Department for Health said: “As the public would rightly expect, we are working closely with the NHS to ensure we are ready for extra pressures this winter, including providing an extra £79m last year to significantly expand our mental health services, enabling more children and young people to get help.”

Mr Fitzpatrick said there was “almost nothing that we can do right now that’s going to be in time for 1 October when prices go up”.

However, there were lots of short, medium and long-term changes to the energy system that would make it work better for customers, he said.

“It is incredibly important that we have a plan that will get us through the winter no matter what. We can’t wait for the cold weather to come to try to figure out what we’re going to do about it.”

Mr Fitzpatrick also wants to create a “national obsession” with energy efficiency including a medium term plan to insulate the UK’s energy-leaky homes.

Longer term, he suggests the UK should establish a single strategic buyer for all the UK’s energy needs.

He argued this would mean the UK could secure its energy on a multi-year basis rather than individual companies buying their energy three to six months in advance.

“Over the past 10 years, the free market approach has worked to deliver affordable energy for the UK but we should accept that the next 10 years are going to look very different,” he said.

“We are entering into an era of global competition to secure energy supplies and we need to think strategically, long term and at a national level.”

A spokesperson for the Department for Business said: “Officials are making the appropriate preparations in order to ensure that any additional support or commitments on cost of living can be delivered as quickly as possible when the new prime minister is in place.”

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