Wednesday March 12, 04:36 PM
UK BUDGET Darling wants energy cos to spend 150 mln stg on social tariff UPDATE
(Adds Centrica CEO comment)
LONDON (Thomson Financial) - Chancellor of the Exchequer Alistair Darling said he wants UK energy suppliers to spend 150 mln stg on their social tariffs to help vulnerable customers, up from the current 50 mln stg.
Darling said he wanted a 'fairer deal' for the 5 mln customers who pay higher bills with pre-payment meters compared to those who receive discounts for paying via direct debit or online.
A Treasury spokesman said after Darling's maiden Budget speech that the cost difference between the two forms of payment 'should be 85 stg on average, but at some companies the differential is 300 stg so there's potentially a problem with the way the market is operating there as well, but it is certainly not equitable'.
Darling said the government will work with the companies either through voluntary or statutory means to develop a plan for poorer customers.
The government already has powers in the Electricity and Gas Act - legislation that was put in place in the 1980's - for the secretary of state for business to intervene and change these tariffs, a Treasury spokesman told reporters.
The announcement lifts the fog of rumour that led up to the budget, with some reports suggesting that the government was intending to impose a 9 bln stg sector-wide windfall tax on energy companies' free carbon emissions.
Analysts see the final decision to give the companies the option to voluntarily increase spending on social tariffs as a compromise, and consider it positive for the companies.
The fuel poverty scheme has been welcomed by UK energy supplier EdF Energy, though on the condition that the policy does not hamper competition in the UK energy market. 'We believe that this proposal should be examined and developed through consultation,' said Vincent de Rivaz, chief executive of EDF Energy.
'This should ensure that the outcome is both fair and effective and does not distort competition and ensure that the outcome is ready for next winter.'
Meanwhile Sam Laidlaw, Centrica (LSE: CNA.L - news) 's chief executive, has welcomed the opportunity to speak with the government, though he did not comment on the feasibility of increasing expenses for social tariffs.
'We are pleased the Chancellor has left the way open for further discussions with the industry on this issue and we look forward to explaining our thinking in more detail,' said Laidlaw. 'Tackling fuel poverty requires well targeted assistance and we need to remember that the majority of people in fuel poverty are not on pre-payment meters. Any extra benefit must reach those in most need.'
The consumer watchdog, energywatch, is urging the government to force the energy companies to raise their spending on social tariffs.
Adam Scorer, campaigns director at energywatch, said: 'If government is going to see a tripling of industry commitment to social tariffs it will need to require all suppliers to develop social tariffs to some minimum standards.'
'One thing the government should have learned by now is that relying on voluntary action by suppliers will not deliver the goods,' he said.
In the budget, Darling also said that he wants smart metering for non-residential buildings, to encourage energy efficiency. He wants non-residential buildings to become zero carbon from 2019, not far behind UK households, which are targeted to be carbon-free from 2016.
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