Energy boss's plan to reduce bills by £1,000 with new 'social tariff'

LONDON, ENGLAND - OCTOBER 05: Chancellor Rishi Sunak speaks with members of staff as he visits the headquarters of Octopus Energy on October 05, 2020 in London, England. The prime minister and Chancellor of Exchequer Rishi Sunak visited the British
Keith Anderson, CEO at ScottishPower, called for a "social tariff" to help Brits struggling with their energy bills. (Getty)

An energy boss has called on ministers to introduce a "social tariff" system for energy bills to slash costs by £1,000 for the poorest.

Keith Anderson, CEO at ScottishPower, told MPs a "significant" and "massive" shift in the government's approach is needed after bills soared by 54% on 1 April to £1,971 a year for the average household.

Anderson warned that this winter – when the price cap is expected to increase further – would be "horrific".

"I honestly believe the size and scale of this is beyond what we can deal with," he told MPs on Tuesday.

"It’s beyond what I think this industry can deal with - and I think it needs a massive shift, significant shift, in the government policy and approach."

Anderson suggested a "social tariff" to target help to those least able to afford their energy bills.

"I think it's got to the point now where the government in October, for anybody that's deemed to be in fuel poverty or vulnerable, and that will include pre-payment metre customers, a £1,000 payment should be taken off their bill and put into a fund," he said.

"That fund can then be repaid over a 10-year period across the rest of the customer base."

Read more: Cost of living crisis: Energy bosses warn of 'horrific' October price rises

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Keith Anderson, CEO at ScottishPower, described the energy bill crisis facing low income households as "horrific". (parliamentlive.tv)

He added: "The problem's got to the size and scale that it requires something significant of that nature - where for those people who are deemed to be in poverty, fuel poverty, are vulnerable [or] need something the size and scale that puts their bill back to where it used to be before the [energy bill rises in April]."

Rishi Sunak announced his "Energy Bill Rebate" scheme in February, which he has staunchly defended as the right way to support Brits despite backlash that it does not do enough to help the poorest.

The scheme comprises of:

  • a £200 energy bill discount paid back over five years to every household; and

  • a £150 council tax rebate is for households band A-D

However, Labour have criticised the package of measures to support Brits struggling with energy costs, describing the £200 discount as a "buy now, pay later" scheme.

Read more: Energy prices to remain sky high for years, experts warn

“This is a buy now, pay later chancellor, who is forcing this compulsory loan on people that people have to pay back then for years to come,” shadow chancellor Rachel Reeves told Yahoo News UK.

“The scam in it all is that, even if you don’t get the loan, you’re still having to pay it back."

Labour have called for a one off Windfall Tax on the large profits oil companies during the pandemic to fund up to £600 off household energy bills.

Earlier this month, the End Fuel Poverty Coalition said their estimates placed some 6.3m households in fuel poverty when the energy price cap increase happened on 1 April 2022.

Chancellor Rishi Sunak speaking at a press conference in Downing Street, London. Picture date: Thursday February 3, 2022.
The chancellor's partially repayable "Energy Rebate Scheme" worth £350 has been criticised for not going far enough. (PA)

Elsewhere in the committee Michael Lewis, CEO at EON, provided insight into the scale of the issue by the increase in customers in distress.

"We’re putting more people onto the help lines," said Lewis.

"As I say, we had 8,000 additional calls last week, all around vulnerability and ability to pay."

It comes after analysts Cornwall Insights warned on Friday that the energy bill price cap could hit £2,607 this winter - with energy bills not set to drop below current levels for several years.

The Office for Budget Responsibility (OBR) warned in March that energy bills could hit almost £2,800 this winter, a near 120% increase on the year before.

Read more: Cost of living crisis is 'humiliating' working people, poverty charity says

The energy bill crisis comes alongside soaring inflation and tax hikes, with the OBR warning Brits are facing the steepest fall in living standards since records began.

Watch: Business secretary Kwasi Kwarteng says energy bills could reduce within 3 years