1. Introduce a flexible energy discount mechanism (also known as a social tariff or targeted bill support).
In August 2023, we published recommendations for a targeted, flexible, and dynamic discount mechanism to reduce levels of fuel poverty and eradicate extreme fuel poverty; protect health and address inequalities by ensuring everyone has satisfactory levels of energy provision, comfort, and warmth. The key elements of our recommendations are that eligibility would be automatic, include those on low incomes as well as passport benefits, cover their standing charges and provide them with a discounted unit price. The design would be flexible enough to account for additional energy consumption needs, due to health, geography, heating source (also benefiting those off the gas network who rely on unregulated fuels such as heating oil), or house condition, when combined with income factors. We also made recommendations about the regulation and operation for the flexible energy discount mechanism.
We have recently participated and fed into the Scottish Government’s Social Tariff Working Group, which is promoting the step change a flexible energy discount mechanism would achieve for those suffering fuel poverty. Dr Allan, Scotland’s Minister for Climate Change, set this out in his letter to you of the 25 March 2025.
We also recently responded to the Department for Energy Security and Net Zero’s consultation on the expansion of the Warm Home Discount (WHD). We made the point that WHD has not kept pace with the cost of living or the high cost of energy, eroding its effectiveness over the years in supporting the reduction in the fuel poverty gap[2]. We see the expansion of WHD as an interim step in providing better support for vulnerable consumers. Automatic eligibility for those in Scotland to the WHD as well as expansion of eligibility to include those with low incomes, not in receipt of means tested benefits, and including those in receipt of Carer’s allowance, would be a welcome step towards a flexible energy discount mechanism and would have some impact on the fuel poverty gap. We recognise that the WHD, properly developed, could evolve to become a flexible energy discount mechanism, and has the potential to substantially reduce the fuel poverty gap.