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Fuel Poverty and Energy: Navigating the Path Forward

A thought piece by Jessica Taplin, CEO of British Gas Energy Trust

As we usher in 2025, the persistent challenge of fuel poverty continues to cast a shadow over millions of households across the UK. The convergence of rising energy costs, the urgent need for sustainable energy solutions, and the imperative to support vulnerable communities demands focused attention and action.

Recent developments from Ofgem and the Department for Energy Security and Net Zero mark important steps forward. However, these steps must be bolstered by practical solutions and strong collaboration among stakeholders, including government, industry, and organisations like the British Gas Energy Trust.

Recent Developments in Energy Policy

In December 2024, Ofgem launched consultations addressing several critical aspects of the energy sector:

Energy Price Cap Operating Cost and Debt Allowances Consultation

The “Energy Price Cap Operating Cost and Debt Allowances Consultation” focuses on adjusting the energy price cap to better reflect the actual operating costs of energy suppliers, including provisions for managing energy debt. This could be an important step in stabilising the energy market and ensuring suppliers can operate sustainably while protecting consumers, especially vulnerable households.

This is an important consultation, given it relates to the level of operating costs that suppliers are able to recover through the price cap. Clearly, it is important that an appropriate balance needs to be struck between avoiding exacerbating the financial burden on households that are already struggling with high energy costs, while still ensuring that suppliers are able to recover efficiently incurred costs.

Currently, one of the key levies on energy bills is the “Energy Company Obligation” (ECO), which helps fund energy efficiency improvements for vulnerable consumers and contributes to fuel poverty alleviation efforts. Other levies, including those aimed at renewable energy support, also add to household bills. These levies have steadily increased over time, directly impacting the cost of energy.

While these initiatives are vital to supporting long-term sustainability and reducing carbon emissions, it’s crucial that any further levies or additional costs are not added to the unit cost of energy. Currently, the increase in levies contributes to rising energy prices, and further levies placed directly on consumers’ bills will only compound the pressures on vulnerable households.

In this context, it’s important that policymakers and Ofgem explore alternative means of funding these initiatives—such as through general taxation or other revenue sources—rather than adding more to the existing levies on household energy bills. This would help avoid driving up the unit cost of energy and reduce the impact on consumers who are already struggling to make ends meet. The aim should always be to ensure that vulnerable households are not left further disadvantaged by increased energy costs.

Unintended consequences must be considered – The energy price cap is designed to protect consumers from excessive charges. By capping the maximum amount suppliers can charge, the cap limits revenue potential, especially during periods of high wholesale energy costs. Whilst on the surface many might say what’s the problem with that, this financial constraint can reduce the funds available for essential investments in infrastructure, innovation, and customer support services.

Consequently, energy companies might face challenges in offering comprehensive assistance to vulnerable customers, as providing in-depth support often requires significant resources.

Moreover, the cap’s effect on profitability can lead to increased financial risk, potentially affecting the company’s stability and its capacity to invest in long-term solutions aimed at reducing fuel poverty.

Since August 2022, British Gas has announced a series of customer support packages, totalling £140 million by February 2024. At the British Gas Energy Trust, we have received nearly £200 million to fund grants and initiatives combating fuel poverty since being established in 2004.

British Gas’ commitment to tackling fuel poverty is reflected in its voluntary initiatives, which rely on sustained profitability to continue. Policy decisions in Westminster can create an negative ripple effect, that can lead to unintended consequences such as the removal or reduction of funding to existing projects, this would disrupt services and severely impact on organisations the Trust funds, charities such as Citizens Advice Doncaster Borough,  Zinthiya Trust, Bromley by Bow Centre, Riverside Advice, Money A&E, Money Matters and Navigate.

Other energy providers also contribute voluntarily to schemes aimed at addressing fuel poverty, supplementing their regulatory obligations. For instance, EDF Energy has allocated an additional £40 million to support customers facing financial difficulties during the energy crisis. This includes reducing standing charges for vulnerable customers, enhancing the Customer Support Fund for debt relief and energy-efficient appliances, and funding home insulation projects. Similarly, UK Power Networks runs its ‘Power Partners’ community scheme, investing approximately £300,000 annually to provide grants of up to £20,000 to charities tackling fuel poverty.

Moreover, Energy UK’s Vulnerability Commitment includes 13 supplier signatories, covering over 95% of the domestic retail market. This initiative requires companies to go beyond their statutory obligations in supporting vulnerable customers, with independent annual assessments to ensure accountability and progress.

These examples demonstrate that voluntary funding from energy suppliers is an industry-wide effort to mitigate fuel poverty. However, policy decisions affecting supplier profitability have the potential to reduce the scope of such initiatives, directly impacting the vulnerable households that rely on this support. By understanding and supporting the balance between reasonable profits and community investments, stakeholders can ensure these vital programmes continue to thrive.

Therefore, while the price cap serves an important protective function, it is crucial to balance consumer protection with the financial health of energy suppliers to ensure they can continue to support vulnerable customers effectively.

Implications for Fuel Poverty

The recent consultations by Ofgem directly address some of the most pressing issues in the energy sector, and demonstrate Ofgem’s recognition of the multifaceted nature of fuel poverty and its commitment to tackling both immediate financial burdens and the structural challenges within the energy market. Their success, however, will depend on effective implementation and collaboration across all stakeholders.

British Gas Energy Trust’s Role and Perspective

At the British Gas Energy Trust, we are committed to aligning our efforts with these national strategies. Our ongoing work focuses on:

A Collaborative Path Forward

Fuel poverty is a complex, systemic issue requiring an integrated approach:

Conclusion

Addressing fuel poverty requires more than policy changes—it demands a cultural shift toward equitable, sustainable energy solutions. The recent consultations from Ofgem and the Department for Energy Security and Net Zero could lead to significant progress, but the success of these initiatives hinges on effective implementation and cross-sector collaboration.

We welcome Ofgem’s consultations and support their overarching goals. However, we emphasise that these policies must be implemented with a deep understanding of their impact on lower-income households.

At British Gas Energy Trust, we remain steadfast in our mission: to ensure no one must choose between heating and eating. Together, we can create a future where energy is accessible, affordable, and sustainable for all.

Jessica Taplin is the CEO of British Gas Energy Trust, dedicated to alleviating fuel poverty and supporting vulnerable energy consumers across the UK.

Sources:

  1. Department for Energy Security and Net-Zero
  2. British Gas Energy Trust
  3. Ofgem Consultations
  4. Energy Price Cap Consultation
  5. Energy Company Obligation (ECO)
  6. Ofgem Consultations on Debt Relief
  7. Warm Home Discount Scheme
  8. EDF Energy Crisis Support Initiatives
  9. UK Power Networks Power Partners Scheme
  10. Energy UK Vulnerability Commitment
  11. Energy Security Bill