As part of a UKERC project on social and flexible tariffs, this brief assesses how different tariff designs, namely direct bill support, unit price discounts and rising block tariffs, can improve affordability while remaining deliverable and aligned with wider energy system goals.
Rising block tariffs can, in principle, lower bills for low consumption (and often lower income) households, and increase bills for high consumption (and often higher income) households. However, considering a plausible block tariff structure, our analysis shows that many households living in fuel poverty within lower income groups are likely to face higher bills. This is because fuel poor households are more likely to live in inefficient homes, rely on electric heating and have higher essential energy needs, which push their consumption into higher price blocks even at their relatively low income and overall consumption levels.
Thus, the key insight emerging is that if rising block tariffs are implemented without safeguards, the outcomes for households that a social tariff is meant to protect could be exacerbated, and even worsened.
Policymakers should approach rising block tariffs with caution, prioritise transparently funded targeted support, and align tariff design with wider measures to improve housing and reduce structural energy needs. Effective design should be guided by granular distributional analysis, aligned with wider investment in energy efficiency and social policy goals, and informed by meaningful engagement with consumers and those with lived experience of fuel poverty, to ensure any scheme is both equitable and feasible.