Octopus boss: Energy firms should give cash to people losing winter fuel payment

The boss of Octopus Energy has said energy suppliers should “be helpful” to the Government and give extra support to elderly people losing their winter fuel payments.

Greg Jackson, who founded Octopus in 2016, told PA news agency: “We all know there were some people receiving the winter fuel allowance who didn’t need it – that costs everyone else money.”

He added: “But then there’s the grey area of people losing it that need it – that’s where we can help.”

Under plans announced by Chancellor Rachel Reeves in July, winter fuel payments will be restricted to those receiving pension credit.

It means around 10 million people will lose out this winter, with the benefit taken away from all but the poorest pensioners in the country. About 11.5 million people used to receive it.

The Government argues it is right to means-test the benefit, worth up to £300, in order to tackle what it calls a “black hole” in the public finances.

Outcry

But it has also prompted bitter outcry, including from some Labour MPs, with critics pointing out that pension credit only tops up income to £11,300 a year for individuals, meaning many who do not qualify could still struggle paying bills.

Mr Jackson, who has been vocal in his support for previous Labour policies, said: “In these transition periods, it’s easy for people to kick and scream.

“Alternatively, companies and others can say: ‘How do we make this work in a way that is best for Britain and, in our case, best for our customers?’”

He added that the Government has got to “make difficult decisions. So now let’s be helpful in making sure that when you make those decisions, we can look after the people who will be worst affected”.

However, ministers should keep a “close eye on the impact” of the policy if this winter is colder than usual, Mr Jackson said, and be “ready to act” if more support is needed.

Octopus, the UK’s largest energy supplier, announced last month that it will continue its £30 million assistance fund into this winter for pensioners who do not qualify for state support.

The company also has a range of other measures, including giving out free electric blankets to vulnerable customers.

Nonetheless, energy suppliers have come under pressure for making large profits over the last two years, while bills have rocketed as a result of soaring gas prices.

Octopus turned its first ever profit of £203 million for the year ending April 2023, the most recent year on record, while revenue tripled to £13 billion.

The company’s UK energy retail arm took on £69 million of costs to lower customer bills over the same period.

Mr Jackson’s comments come weeks before energy bills are due to get more expensive again this winter.

Price cap

Regulator Ofgem said the average household bill is set to increase by £149 from October after it increased the quarterly price cap for the winter months.

Last month, Labour’s energy consumers minister Miatta Fahnbulleh held talks with suppliers including Octopus, asking for help with a marketing campaign to alert customers to bills support that is already available.

Sources with knowledge of the matter said ministers also asked firms about longer term market reforms for energy bills, including a social tariff, something campaign groups have proposed for several years.

The measure would likely take the form of a targeted discount energy deal for poorer customers, and could be below the price of the cheapest available standard energy tariff.

Mr Jackson said it is “important” to bring energy costs down for everyone, but added that “the question is who pays” for a social tariff.

He said: “It’s either going to be the Government, in which case they need to put taxes up, or it’s going to be paid for by other energy customers, in which case bills go up for everyone who’s not getting it. The challenge is that bills are already too high.”

Instead, the Octopus boss has been lobbying ministers to introduce another pricing system, based on proximity to where clean energy is generated, to reform bills.

Locational marginal pricing

The system, known as locational marginal pricing, would see people living near wind farms pay less for electricity.

Regional pricing is “the critical thing we need to do”, Mr Jackson said, citing a recent report carried out by FTI Consulting, which claimed it could save bill payers £51 billion by 2040.

Octopus already offers time-specific discounts for people living near wind farms of up to 50% in high winds, when the turbines generate more power.

The initiative has led to tens of thousands of people contacting Octopus since 2021 asking for turbines to be built near their homes, he said.

Critics say it would be unfair for people to pay less based on where they live.

Mr Jackson said that while the biggest discounts “will be the areas with the most electricity generation”, such as areas of Scotland, the price would drop “in every region” because the transmission system would also be “more efficient”.

The Labour Government has introduced a swathe of changes since the general election, including forming a new state energy investment firm, GB Energy, to help boost renewables in recent months.

It is also consulting on reforms to the planning system designed to make it easier to upgrade the power grid and build clean energy projects, which Mr Jackson said he supports.

But it is “early days” for the new Government, he said. “We need to see the hard stuff happening to push energy costs down for good.”