Energy bills could rise for low income families due to push for net zero, Ofgem warns

The rising cost of net zero policies could disproportionately hit lower income households, the UK’s energy regulator has warned.

Ofgem has announced it will examine how to better protect families from future hikes to energy bills as the country continues to explore sustainable fuel sources, such as heat pumps.

However, the regulator shared it was “very concerned” that poorer households are not fully protected from future energy price shocks.

This comes amid growing concern surrounding the number of consumers who are trapped into debt and repayment plans.

According to Ofgem, the high cost of recovering debt may have devastating for the UK’s retail energy sector.

The regulator questioned the risk posed by the significant investment costs into net zero policies which encourage cleaner energy due to the knock-on effect of lower income customers.

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In recent years, the Government has launched initiatives, such as the Boiler Upgrade Scheme, which cover the cost of appliances to replace gas boilers.

However, experts have highlighted the support available is not enough the cover the entirety of the cost of making the transition to environmentally-friendly energy alternatives.

Lower income households are less likely to be able to invest in the technology or change their behaviours to mitigate the rising cost, Ofgem claims.

As part of this warning, the regulator has announced a call for input from stakeholders to “work out the steps” to protect households from further dramatic hikes to energy bills.

This will “ensure that the debt burden doesn’t leave us with an unsustainable situation which will lead to higher bills in the future”, the organisation says.

Furthermore, Ofgem plans to examine how it can provide better support for consumers amid a changing energy market.

This recent call for input from the country’s energy regulator will be open until Monday, May 13, 2024.

Tim Jarvis, Ofgem’s director general, outlined his concerns about the impact of the net zero agenda on household energy prices.

He explained: “Prices are slowly falling as the energy market stabilises but many people have been struggling to pay their energy bills amid unprecedented levels of debt and the legacy of this risks becoming an enduring problem.

“There have been numerous interventions to support different groups of customers, but a longer term solution requires us to take a step back and see the big picture which is why are launching this call for input on affordability.

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“We need to look at energy affordability as a whole – what’s working, what is not and where are the gaps?”

Recently, the regulator has changed rules surrounding standing charges so repayment customers are not charged more than anyone else.

It has also called for energy suppliers to do more to take care of their customers but Ofgem’s director general believes more needs to be done.

Mr Jarvis added: “However, the growing level of debt means a longer term approach is needed to ensure we have a stronger market and the right support for struggling consumers to protect them from future price shocks and ensure all consumers benefit from the transition to a new cleaner, more secure energy system.”