Social Tariff Working Group minutes: February 2025

Attendees and apologies

• Head of Heat Strategy and Consumer Policy Unit , Scottish Government (chair)
• EDF
• EON
• Scottish Power
• Centrica
• OVO
• Octopus
• The Wise Group
• British Gas Energy Trust (BGET)
• Inclusion Scotland
• Consumer Scotland
• Advice Direct Scotland (ADS)
• Energy Advice Scotland (EAS)
• Citizens Advice Scotland (CAS)
• Scottish Fuel Poverty Advisory Panel
• EON
• EDF Energy

Items and actions

Welcome 

• the chair thanked stakeholders for attending the meeting, confirmed the agenda, and reminded the membership that the next and final meeting will be chaired by the Minister for Climate Action
• this meeting focused on consumer eligibility, the level and form of support, and funding
• the group agreed the minutes of the previous meeting which will be published on gov.scot

FOI Update

• the Scottish Government is currently responding to a Freedom of Information (FOI) request for information held in relation to a social tariff
• the chair thanked members for participation in the group and provided an update on the approach being taken in responding to the request
• the SG will continue to publish minutes online and the final recommendations will be publicly available. There were no comments from stakeholders

Consumer eligibility 

The general view was that while a social tariff could be offered to those in receipt of means-tested benefits, this would be an incomplete and imperfect way in which to determine need. The chair noted that engagement suggested a better and more sophisticated set of metrics should be developed to ensure an adequate level of support reaches the right people. The following points were made in discussion:

• the discussion paper effectively articulated the issues and solutions meaning that, although the group has been convened by the Scottish Government, the work is relevant to GB-wide consumers
• HMRC income data are based on individuals, not households, and only include those who complete self-assessment forms or PAYE
• UKG has committed to improving data sharing and the SG is involved in this work. Data sets which help us understand household composition (i.e. council tax and child benefit) also exist. This should be reflected in the final draft report
• HMRC data collection for winter 25/25 is not the solution. However, DWP data is understood to be more accessible and can be used to make progress
• not all disabled people are on benefits but many have unavoidably high energy costs. Improved energy efficiency does not reduce the need to use more energy
• there should be an opportunity for consumers to apply for the social tariff discount even if they don’t meet the standard criteria
• the DWP issues sanctions and penalties so there is a need to be cautious with the data it holds and share. While DWP data might be the easiest solution to ensure that the social tariff is delivered quickly, it needs to work for as many of the right people as possible
• a potential solution would be to learn from the first winter of delivery through engagement with consumers and the industry to understand what didn’t work
• the application process for the discount must be accessible and not online only, with due consideration given to fluctuations in energy bills and changes in people’s circumstances
• the open banking model could provide helpful information on data collection for this group to consider
• issues facing rural and island consumers must be considered and addressed
• this work could potentially have a positive impact on other energy efficiency schemes

The group agreed that a more sophisticated set of metrics based on household income, the number of people in the home, and unavoidable energy use (such as due to medical requirements) should be developed to ensure that an adequate level of support reaches the right people. 

Level of Support

The group generally favours a formula or matrix based system which automatically applies the payment or discount to eligible households based on a sophisticated set of metrics. The discussion consolidated the group’s thinking on the level of support required, including for those off grid. Points raised included:

• the unit rate discount approach may be easiest to implement as it is better at capturing the higher energy users. It is also the ‘fairest’ way from some suppliers’ perspective
• the Warm Homes Discount (WHD) scheme would have some relevant data but it wouldn’t include all the data required
• during the energy crisis, suppliers stood up the energy price guarantee (EPG) quickly so there are systems in place which could be utilised
• Citizens Advice research has also favoured a tiered approach to a social tariff discount
• there was an agreed need for a clear and simple scheme to be communicated to customers with complexities resolved in the background to avoid undue stress on the consumer. This may include using the terminology “lower rate” rather than “discount” when discussing the scheme with customers
• customers are on different unit prices and tariff schemes. The system must therefore be proportionate to the need of customers and not a flat payment 
• future proofing the scheme is important, with the Belgium model cited as being a success and competition driven
• while there would be operational issues associated with every scheme design, it was felt that discounts on unit rates could allow the scheme to be stood up quickly while meeting the aims of the policy
• once the scheme is in place, it will need to be improved continuously. Suppliers would still be able to offer better deals so customer engagement remains crucial 
• alternative fuel users should be treated the same as on-grid energy customers
• payments for the fuel insecurity fund were available to those using alternative fuels although it was difficult to do. During the energy crisis, there was the alternative fuel payment scheme, which was challenging to stand up
• alternative fuel users would likely need to be supported through a separate scheme while maintaining the principle of equitable treatment

The group generally agreed that a unit rate discount approach is preferable, however other approaches, such as a tiered rebate, also found support and were preferred by some members. Fundamentally, the level of discount or support should be proportionate to need, and this could be delivered through a unit rate discount or a rebate based on a matrix or formula. 

Scottish Government analysts will model the impact on fuel poverty of a unit rate discount applied at different tiers (i.e. 10%, 20%, 30%) to different customer cohorts, with the option to also remove the standing charge and cap overall bills for people with unavoidably high energy use at the level of the price cap. This modelling will be illustrative and the final scheme design will depend on UK Government decisions on eligibility and level of support. 

Funding

It is important that this group makes credible recommendations. The options available include general taxation, a levy on energy bills, or via industry (with a focus on other parts of the supply chain rather than energy suppliers). Work on costings is continuing with SG analytical colleagues. 

The following points emerged from discussion:

• general taxation was the majority preference but this is for the UK Government to decide. The group’s focus should be on how to get help to people who need it, not how it is funded
• if this scheme replaced another scheme then the UK Government may identify a gap in market to fund it
• bills should not exceed what customers already pay. The scheme should not burden consumers and make fuel poverty worse
• decisions will be needed on whether to add the discount to gas or electricity bills
• some suppliers will have more customers eligible for the discount than other suppliers and that could lead to a distortion of competition in the supplier market
• energy consumption could increase as a result of a properly funded model; the group needs to recognise and reference this in the recommendations paper

Next Steps 

The chair thanked everyone for their continuing support and input into this working group, reminding members that we will be drafting a report based on majority consensus and reflecting where this is so. Bilateral engagement in between formal meetings will continue in the meantime.

The next meeting, which will be chaired by the Minister for Climate Action, will take place on Wednesday 26 February and focus on the draft final proposal to UK Government. Final papers for comment will be circulated prior to the meeting.

Summary of Actions and Decisions

• the group agreed the minutes of the previous meeting which will be published on gov.scot
• the group agreed that a more sophisticated set of metrics based on household income, the number of people in the home, and unavoidable energy use (such as due to medical requirements) should be developed to ensure that an adequate level of support reaches the right people 
• the Scottish Government should ensure the work still required on HMRC and DWP data is reflected in the final report
• the Scottish Government to model the impact on fuel poverty based on decisions made by the group to demonstrate the importance of progressing with this work