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Energy crisis requires wholesale reform to tackle rising prices and fuel poverty, warns union

11 January 2022

Leading energy union Prospect has published a new report calling on the government to urgently reform the retail energy market after soaring gas prices caused the collapse of many smaller providers.

The union says that reforming the market and introducing a social tariff would improve trust, protect the poorest and most vulnerable, and help deliver our net zero goals.

Research by the union highlights how policy errors, weak regulation, and poor planning have come to a head, fundamentally threatening the viability of the current energy retail model. This was demonstrated by the collapse of many smaller companies and the effective nationalisation of Bulb which has tested the limits of the existing regulatory regime.

Prospect has written to the Energy Secretary Kwasi Kwarteng, and to MPs, asking them to take the opportunity provided by the current energy price hike to ask fundamental questions about what should replace the current approach, which has led to worse outcomes for consumers and workers. In particular, poorer customers have been hit .

In 2005, the poorest households spent an average of 5.5% of their total expenditure on electricity and gas; by the winter of 2021, this had risen to 8.5%. The Resolution Foundation has forecast that by Spring 2022 energy expenditure by the poorest households will hit 12% of total spending, as fuel bills rise, real wages fall, and welfare benefits are cut.

Prospect is calling for an urgent overhaul of the energy retail market, including:
• Putting the energy retail market into new local control, through publicly-owned regional energy companies – ending the current confusing mix of private energy providers
• Making local authorities responsible to the delivery of energy efficiency measures, such as SMART meters and insultation, to better target support at households most in need
• A new social tariff for the poorest and most vulnerable households from rising prices and fuel poverty

Allowing local control and administration of energy retail would improve trust, improve resilience and protect the poorest households from damaging price fluctuations

Prospect senior deputy general secretary Sue Ferns said:

“The recent energy crisis with soaring prices, the collapse of multiple small energy retail companies and effective nationalisation of Bulb have highlighted the total unsuitability of the current energy retail model.

“The current approach is not working for customers or the workforce. The lack of a long-term energy strategy has undoubtedly contributed to the current crisis, in retail and more broadly.

“With the crisis ongoing now is the time for policy makers and stakeholders to look seriously at alternatives. First of which should be the option of bringing the energy retail market into public hands, controlled locally.

“There is now an opportunity to rethink policy in a way that responds positively to the challenges of climate change and gives greater emphasis to social equity.”


Energy

From generation to transmission, Prospect represents the interests of over 22,000 members working across all parts of the energy sector.