To think tiered electricity prices might work ?

[secrethedgehog]

I saw a suggestion today that a way forward with rising energy prices might be to give every household an allowance ( based on number occupants ?) of x units of energy at a subsidised price. Any units used over that price would then be more expensive, a little more than predicted now, to help finance the reduced price units.
This way the least well off can have at least a minimal amount of heating and power to cook etc without worrying about horrendous bills.
Anyone wanting to use more, and can afford to do so, is then helping to subsidise the price for those less able to pay .
Seems to allow an element of choice whilst encouraging less energy use and therefore having green credentials
Sure there are flaws but seem to be some advantages too ?

"Sure there are flaws but seem to be some advantages too ?"

I'm not sure there is any solution to the energy price problem that is flawless. This one seems quite sensible. Best not to let the perfect be the enemy of the good.

umm no. I’m not sure why the people that can afford it should have to subsidise for those that can’t!

You advantage is make those that have more money pay for everyone else.

just no.

Isn't taxation a case of those who can afford it (life) subsidising those that cannot? Yet people largely accept the need for taxation.

I like the idea of having a basic allowance of cheaper of electricity for everyone. So you can at least cook one hot meal a day and have heating on a bit without worrying. That would be better than giving more handouts.

However, I'm not sure its fair charging some people more for the higher rate when they have no choice but to have the heating on more e.g. sick and disabled, families with young children, elderly. What about people living in the far north of England where it is colder than the south coast? Would they get a bigger allowance? It seems there would be too many exemptions and it would get complicated.

The simplest solution is to tax the gas and oil companies on their profits and use that money to reduce the price cap. That helps everyone equally but of course the government won't do that.

Not a bad idea, but not implementable in time for this winter I'd bet.

That's the big problem. Huge structural change required, but not the time to do it before the problem hits.

So need brute force implementation of help now, in a way that will be massively criticised and unfair, whilst also building long term changes which are more nuanced.

Interesting idea, however a lot of rural homes depend on electricity because there is no gas to the premises and there has been a move away from oil especially in new builds. A lot of my neighbours are electricity only.

It's a good idea. It would be difficult to come up with a basic allowance that was fair for everyone - for example people who are ill/disabled need to be home all day, and some use electricity for heating while others don't. But I think it would be possible to come up with a system eg giving extra allowance for people who need more energy due to illness.

@Christmasiscominghohoho yes but everyone gets the basic amount , so if you choose not to use more than that then you aren't subsidising anyone.
Thing is that those that are financially better placed, are going to end up paying for this one way or another with increases in tax, at least this feels more direct in a way.

@HotPenguin I think it would gave to be a fairly blunt tool and not be fair in some ways, just like the furlough payments etc.
I don't think you can be fair to everyone just the majority?

Poorer people would still end up paying more due to not being able to afford the most economical appliances, furnishings or even have control over the insulation or appliances in rented accommodation - if the 2nd tier was dearer to encourage less use, it would therefore organise them even more.

I think it’s a pretty good idea. And while it may start off a blunt tool could be improved with time to address unfairness. When it comes to disabled I would expect the benefits to increase to supplement support. If we can get to a place where energy which is needed for basic eating and not freezing is affordable and surplus luxury/ ease use is more expensive - that would seem sensible. This seems one of the best ideas I’ve heard so far.

Heat the person not the house.

An allowance per person could maximize use of housing but would cause issues with people sharing who shouldn't. Majorly difficult to implement.
Tiering of rates so first few units are sensible priced wouldn't help those who need more electric but additional ratings could help. But then the energy companies would struggle to manage the billing for anything so complex.

The govt just throwing money at energy companies isn't going to help or be a long term solution.

Vulnerable people who need to be warm need good quality insulated homes that are cheap to keep warm. We need to be insulating where possible too for everyone.

Will office buildings finally turn everything off at night?
Will streetlights times be reduced or turned off entirely?

I think anyone that qualifies for the existing warm homes discount should automatically be on a social affordable tariff straight away. That should take the pressure off the most vulnerable.

Nope. The point is we are facing a twofold problem atm. 1) We need to reduce demand. The best way to achieve this is still through the price mechanism. 2) We need to do this without hurting the weakest members of society, who don't have a choice about basic consumption- they need to eat, they'd rather not freeze to death.

Tiered rates are a sensible way of addressing both problems by keeping base consumption alone but addressing optional consumption at the margin.

The problems you bring up are about fine-tuning. In principle it's not impossible to introduce a differentiated base tariffs - depending on household size, with exemptions, etc. Just a matter of how much administrative capacity you have to work with, and what costs that will incur. And also, it's never possible to do justice to each and every individual circumstance- that's the dilemma of rule-making in general.

It would be difficult to come up with a basic allowance that was fair for everyone

Maybe just add a tax/charge of 10p (or any fixed number) per kwh to both electricity and gas bills, and distribute the proceeds evenly to all electricity accounts. Everyone would pay the charge on all their consumption, but people who used a below-average amount of energy would get back more than they were charged.

Good to see Christian ethics in full flow 😣

@Christmasiscominghohoho you realise even those who are well off are going to struggle?
We're on a relatively higher income ( though we are both still within the 20% tax bracket) and I can't just poof an extra £7k out of thin air.

Higher income earners pay more tax subsidising others, so why can't they get help when also needed?

Also, those who have spare money will need to continue spending to keep businesses going as long as possible. Once higher earners cut back then you will see the retail/hospitality/beauty sectors collapse. Guess who's usually employed there? Those who may struggle. Sounds insensitive but those higher earners spending may keep businesses going for longer.

By that theory I'd be classed as being 'well off', presumably because I don't claim any benefits. Unfortunately I have cancer and two autoimmune diseases and work only 4 days a week (although been off sick for months). Because I work and no educational age children, even though my DP is out of work we get precisely £0. I would be about £400 a month better off if I wasn't working. I'm sure there are many in my financial (if not medical) situation where we just aren't entitled to anything.

Sounds good to me. Given that people are on different rates at the moment, it may not be that difficult to have a basic rate (with different thresholds by household size and circumstance) and a premium rate.

We do need to incentivise people to use less. It wouldn't be a matter of those who can afford it paying for those who can't any more than lots of other services - e.g. people who buy multiple cars pay more road tax; people who travel first class subsidise cheaper tickets: your choice to choose to pay extra for a luxury.

I’m fed up of being told to subsidise others. I pay six figures in tax a year, that is what it is for. The government needs to sort this mess out using tax money, not have different tiers of energy prices etc.

Tax take could subsidise the basic rate for everyone, then? After basic rate, you pay what the market dictates. But the idea if I've understood right is everyone gets the basic rate.

Would cost people in cold parts of the country like Scotland more. So no it wouldn’t work. Also would cost people who run expensive medial machinery from their house more too. Also people with medical conditions that require heat like arthritis would end up in serve debt . It’s a terrible idea.

*medical

But all those things are happening now anyway, unfortunately.

And you could offer the people above more units at basic rate to bring their costs down - unlike now.

I suggested this to my husband earlier today.

The average household (2.4 people) is 2900kwh of electricity and 12000kwh of gas. So each household gets that at the April Cap.

Add an extra 1000kwh of electric and 3000kwh of gas for each additional household member.

Those on low income/disability/uc etc. Get immediately put on a social tariff back to 2021 price cap plus additional support if needed.

Heck, even give those in the North beyond the wall (excuse the lame GOT joke) extra gas to stay warm in the colder weather.

Anything above that usage gets charged at the full cap.

Obviously if your a full electric house another average for that would need to be considered.

Complicated but fairer and probably more sustainable than other options. Richer people can use more, but those who can't can still get support and heat/eat. Also encourages reduction in energy use.

It's too obvious for the government to implement though.