The Warm Home Discount is a scheme designed to lower home energy bills for vulnerable households who are spending more than a fifth of their income on covering energy costs.
Fuel Poverty and Expensive Tariffs
By having to use a much larger chunk of their income to pay for gas and electricity, households in fuel poverty are being forced to choose between staying warm and other necessities such as food or being on time with rent. This impacts both the health of the very young and the very old as several life-threatening conditions can arise from living in a cold home.
The Warm Home Discount is supposed to help people avoid fuel poverty. Whether the customers who take advantage of the scheme are actually saving money, is, however, another question.
The majority of British people get their electricity and gas from one of the Big Six energy suppliers. For those in fuel poverty, 90% of them remain loyal to these large companies, such as British Gas, who are overcharging people by more than £400 a year, in some cases.
How Much Do You Save?
If you are on a Standard Variable Tariff with Npower and use 3100KWh of electricity and 12000 kWh of gas a year (close to the average UK consumption), you will be paying around £1300 against the £898 with a smaller energy provider like Utility Point. By staying with Npower, you are paying £400 more for exactly the same gas and electric supply from the national grid, which all energy companies draw from.
The Warm Home Discount, if you actually do manage to get it, takes off £140 from your household’s energy bills for the year. Even if you somehow managed to get two Warm Home Discounts in one year, then you would still be overpaying by £100 on Npower’s Variable Tariff.
Whilst labelling the Warm Home Discount a scam may be a step too far, it is definitely a false economy for many Brits, calling very much into question the effectiveness of this initiative - now entering its fifth year.
Warm Home Tariff - the sensible alternativeIf Ofgem forced Big Six companies like SSE and Npower to match the cheapest tariffs in the energy market, it would result in greater savings for more people in need. Switching households suffering from fuel poverty to a truly affordable tariff would be cheaper for the taxpayer and would make a bigger impact for vulnerable people.
The fact that several small home energy companies are able to operate successfully while offering cheaper tariffs proves that British Gas and the rest of the Big Six utilities could do the same without damaging their bottom line and even go some way to improving their struggling reputations.
Jumping Through The Warm Home Discount Hoops
For the 2018/19 Warm Home Discount, if you are not an eligible pensioner, you must demonstrate you were being supplied by a participating provider on the 8th July 2018 as well as fulfilling two more levels of eligibility criteria. It is your job to prove you qualify so that even if you have received the Warm Home Discount in the past, you still have to go through all the hassle again
It’s a common misconception that the government manages the totality of the Warm Home Discount scheme. You must apply through your electricity and gas company yourself and have faith that the abysmal customer service the Big Six suppliers demonstrate year after year will process your claim correctly.
Each supplier deals with allocating the Warm Home Discount in its own way. Utilita though, may take the prize for being the least consumer-friendly of the lot by offering only a one week window1 in August to qualify. If you miss it, you are automatically rejected, even though the discount period does not begin until November 2018 at the earliest. Why British energy giants give ordinary people so little time and keep them waiting for so long boggles the mind.
We reached out to a Utilita customer representative for a comment on how someone who is eligible under the broader group should apply. Utilita claim they withhold the application dates a little longer because “in the past it was first come first served which resulted in all our spaces being filled on the first day”. This is a far cry from what the Minister for Energy and Clean Growth, Claire Perry, said in June about how “everyone who is automatically eligible for the £140 discount on their energy bills each winter should be able to get it”.
Is Affordable Energy A Myth?
When Britain deregulated the electricity and gas markets, we were promised more choice and better value for everyone. Bold claims of the power companies “changing their methods and cutting prices”2 were made by the Labour government at the time.
But as energy prices continue to rise for the tenth year in a row, around 2.5 million households have been forced into fuel poverty, according to Ofgem and a report commissioned by the Joseph Rowntree Foundation3, a charity that researches social change. Additionally, the report estimates that fuel poor households are paying anywhere between £70 and £400 more because of prepayment meters, paper billing charges or not switching to a cheaper supplier.
The Warm Home Discount was introduced to mitigate this but it fails to cover all UK energy suppliers, leaving out a lot of the smaller and most competitive companies. This means that those customers who might otherwise be eligible, but who did their homework and shopped around for affordable energy, are being punished because they have compared the market like they were told to.
Meanwhile, most people in fuel poverty do not have the time to research all the companies and to make sense of confusing bills and tariffs. As a result, they stay with needlessly expensive suppliers and falsely believe that they are being helped by the government, even though the Warm Home Discount is essentially managed by manipulative energy corporations profiting from their situation.
Changes to Warm Home Discount
Minister for Energy and Clean Growth, Claire Perry wants us to believe that the government is taking action by announcing that it plans to expand the scheme to smaller companies and their customers over the next three years and that it is exploring ways to automatically match all eligible households by exchanging data with energy providers.
While these proposals may seem encouraging, nothing will change for this year’s applicants who will have to jump through the same hoops as in previous years. Additionally, the Department for Business, Energy & Industrial Strategy clarified that because “the spending envelope for the scheme is fixed, lowering the threshold will not mean more low income and vulnerable customers benefitting from the rebate overall”4. This means that in the future those eligible may see even less of a discount than this year.
With Brexit and budget cuts looming, it is increasingly unlikely that the government, Ofgem and the Big Six will have any reason to make the Warm Home Discount actually useful. What we do know is that winters are becoming more unpredictable as the Met Office continues to issue extreme weather warnings. Those living in fuel poverty are the first ones to feel the impact of dropping temperatures and the self-rationing that soon follows leading, to rising winter deaths.
What Can You Do?
Even if you can get the Warm Home Discount, it is increasingly obvious that it does not guarantee you are getting the best price. Energy companies have no incentive to be transparent or helpful to all eligible applicants and the government is unwilling to improve the scheme or even commit to more funding for the growing number of people who need it.
The only real defence against overpaying is, as always, getting to know your energy bill. With a better understanding of your bills, you can compare unit rates and standing charges, like for like, across the market. This way you can make sure you are paying a fair price and decide for yourself if this scheme is worth it, or whether switching to a more competitive supplier will actually save you more.
1Warm Home Discount 2018/19 - Explained, YouTube
2Electricity deregulation: a shock to the system?, bbc.co.uk
3Time to reconsider - UK energy and fuel poverty policies?, jrf.org.uk
4Households with smaller energy suppliers to benefit from £140 Warm Home Discount on their energy bills, gov.uk