Background to the report 

Prices for electricity, gas and other fuels in the UK and Europe began increasing from summer 2021, initially as economies reopened after COVID-19 and later when Russia’s invasion of Ukraine had an impact on energy markets. As a result, average annual household bills for gas and electricity increased from £1,277 in winter 2021-22 to over £4,000 by the start of 2023. In response, the government implemented eight support schemes from 2022 to 2024 to reduce the impact of increased energy bills on domestic and non-domestic customers.

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The Department for Business, Energy & Industrial Strategy (BEIS) had overall responsibility for the design and early implementation of the schemes for both domestic and non-domestic customers. In February 2023, following machinery of government changes, the newly created Department for Energy Security & Net Zero (DESNZ) took over responsibility for the schemes from BEIS.

Scope of the report 

Now the eight support schemes have closed for payments, this report looks at:  

  • the energy bills support schemes  
  • the schemes’ costs  
  • how DESNZ is considering the schemes’ impacts and learning from the schemes
  • DESNZ’s work to develop a response to future energy price volatility

Conclusions 

BEIS’s and DESNZ’s energy bills support, introduced during 2022 and 2023 at an estimated cost of £44 billion, was undoubtedly successful at protecting the vast majority of consumers from the extremes of energy price increases. The financial support was distributed with comparatively low levels of fraud and error, for which the government deserves credit.

To achieve this, BEIS accepted some substantial risks to value for money, in part because some of the schemes were universal in nature and therefore support may have gone to consumers who did not need it. DESNZ’s evaluation will be important for understanding whether this was offset by the overall economic impact of the schemes. DESNZ must also ensure it draws lessons from the challenges it faced in ensuring harder-to-reach consumers received the support for which they were eligible.

The government is taking actions to ensure the market is more resilient to volatile price fluctuations, such as investing in renewable energy generation and reducing dependence on imported gas, but these measures will take several years to take effect. In the meantime, DESNZ needs to be prepared for further interventions in cases of price spikes and consider how these can be provided in a way that maximises value for money.

DESNZ is considering how it might provide financial support to consumers should energy prices rise significantly as well as looking at making the energy market more resilient. But this work is at an early stage of development and it is not clear how DESNZ will respond in practice. It also risks losing the opportunity of improving oversight and policy making in the non-domestic energy sector if it does not capture and utilise the learning it gained from its interventions to support businesses during the crisis.

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Publication details

Press release

View press release (14 Nov 2024)

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