The UK’s energy regulator, Ofgem, made use of research based on Understanding Society data in its consultation this year on the default tariff cap, and whether it should be adjusted to account for the impact of the pandemic.
In March, it referred to The heterogeneous and regressive consequences of COVID-19: Evidence from high quality panel data by Thomas Crossley, Paul Fisher and Hamish Low, in its review document, saying:
“There is evidence that COVID-19 has not impacted people and society equally. This evidence suggests that COVID-19 is having a disproportionate impact on the most vulnerable. Recent research has found that those with precarious employment, aged under 30, and from minority ethnic groups faced the biggest labour market shocks.”
Ofgem added: “Almost half of the population have experienced declines in household earnings of at least 10%, but declines are most severe in the bottom pre-pandemic income quintiles”, referring to the same research.
Ofgem sets the level of its tariff cap in February and August each year, setting an upper price which energy suppliers can charge customers for each unit of energy they use. Prices fluctuate depending on wholesale prices of oil and gas.
The regulator had reduced the cap by £84 a year in October 2020 to reflect changes in wholesale energy prices during the first Covid lockdown. It rose again, by almost £24, in April 2021 to allow suppliers to begin to recoup some of their costs. Ofgem said at the time that if the cap had not risen then, “this would mean customers facing a much higher adjustment for the next cap period next winter – the time when energy use and bills are at their highest.”
In a follow-up publication in May, Ofgem referred to the paper by Crossley, Fisher and Low again, saying that “research findings from academics, Citizens Advice and the FCA … indicate that the Covid 19 pandemic has led to considerable financial impacts for many customers.” In August, Ofgem decided to keep the cap at the level set in April, where it will remain until March 2022.
More information on the energy price cap from Ofgem
Covid 19Income and expenditureTransport and environment
