Energy profits doubled yet only 1% spent on help for poorest customers

A coalition of Age Concern, Child Poverty Action Group, and National Energy Action is today issuing a challenge to the Government and energy industry to make social tariffs fair for the 5.5 million households who are likely to be in fuel poverty this winter.

As the party leaders continue to battle it out over the fairness agenda, new figures show the combined profits of the big six energy companies last year were more than double those in 2006, rising from £2.07 billion in 2006 to £4.3 billion in 2007. Yet their spend on social assistance schemes decreased significantly as a percentage of their profits, from just 2.1% of profit levels in 2006, to only 1.2% in 2007.

The majority of money spent on social assistance schemes is used to subsidise discounted tariffs. However, as a recent cross-party committee of MPs has warned, Social tariffs are failing to help the most vulnerable households out of fuel poverty. Only a minority of those in fuel poverty are on these tariffs and these rates are not always the cheapest offered by energy suppliers. These tariffs are not sufficiently publicised and are not included on price comparison websites.

The coalition is calling for radical reforms to make social tariffs fit for purpose:

Social tariffs must be made mandatory and should be the lowest rate offered by suppliers, regardless of geographical location.

Social tariffs should be made available to all vulnerable households who need them.

Targets should be set to help switch vulnerable customers to social tariffs with penalties considered for energy companies that fail to take action.

Social tariffs should be promoted more widely and included on price comparison sites and helplines.

As ministers discuss how to help people cope with rising energy prices the organisations are urging the Government to take the lead by working with suppliers on reforming social tariffs, as even some of the energy companies have admitted that voluntary social tariffs aren't adequate.

Four of the big six energy companies have already announced further price rises to counteract a dip in profits for the first half of this year, and the rest are set to follow - which is likely to push another million households into fuel poverty. Energy companies have committed to spending an extra £50million on social assistance schemes this year, but this is just a drop in the ocean of what is needed to help the millions living in fuel poverty, and a fraction of the profits being made.

Table of energy company profits and social tariff spend

Gordon Lishman Director General of Age Concern, said: "All of the political parties are talking about fairness. Our challenge to them and the energy industry is to make social tariffs fair for the millions of the poorest pensioners and families they are currently failing to help.

"It is shocking that by the end of the year more than one in three pensioner households are likely to be in fuel poverty, yet few of them will get any help from their energy supplier. Even some of the big energy companies have admitted that voluntary social tariffs aren't working. The Government and the energy companies must work together to share the rising costs of energy prices fairly by reforming social tariffs. "

Paul Dornan, Head of Policy for Child Poverty Action Group, said: "Social tariffs have been playing too small a role. The poorest families now face an urgent situation with rocketing fuel prices that they simply cannot afford. We cannot have families huddling in the cold this winter inside their own homes which they can't afford to heat. The voluntary approach is failing and government and the energy companies need a plan of action within weeks to ensure the millions of fuel poor households are on social tariffs in time for winter."

Maria Wardrobe, NEA Director of Communications said: "At best, the £225 million promised by suppliers to help those in need will lift just 100,000 out of fuel poverty. This is woefully inadequate when you consider that 5 million households in the UK are struggling to pay their fuel bills and energy companies' have experienced record profits.

"It seems that in this era of expensive energy, consumers take on all the risk and companies' reap all the benefits. The Government must address this injustice and force suppliers to offer poor and vulnerable households their cheapest prices.