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Energy Bills Support Scheme GB: Accounting officer assessment 2022 (HTML)

Updated 12 June 2023

Department for which the accounting officer who made the assessment is responsible:

Department for Business, Energy and Industrial Strategy

Project title:

Energy Bills Support Scheme GB

Main scheme project stage:

Full EBSS GB Business Case approved by Treasury Approvals Point August 2022. Scheme launch date: 1 October 2022.

Introduction

It is normal practice for Accounting Officers to scrutinise significant policy proposals or plans to start or vary major projects, and then assess whether they measure up to the standards set out in Managing Public Money. From April 2017, the government has committed to make a summary of the key points from these assessments available to Parliament when an Accounting Officer has agreed an assessment of projects within the Government’s Major Projects Portfolio.

The assessment detailed below was approved on 16 September 2022.

The Energy Bills Support Scheme Alternative Funding (EBSS AF) is not within scope of this summary. An AOA summary for EBSS AF will be published at a later date..

Background and context

Strategic Context

The UK is currently experiencing an unprecedented rise in household energy bills, driven by rising global energy prices. The default tariff cap for a typical dual fuel household paying by Direct Debit rose by 54% in April 2022 (to £1,971) and will increase by a further 80% in October 2022 (to £3,549). This level of energy bills is unprecedented – historic bills have not exceeded £1,600 (in real terms) on average before this current crisis. This is placing pressure on household budgets and these constraints are expected to lead to potentially harmful underconsumption of energy and other essential goods and services during the winter – survey data which predates the most recent price announcement is already indicating this trend, which is only expected to worsen as the increase in costs bite further. This points to the need for wide-scale support, in addition to the separate targeted support announced.

The purpose of EBSS is to reduce the impact of high energy bills on households in winter 2022/23. The Energy Bills Support Scheme Great Britain (EBSS GB) will provide £400 to each of approximately 29 million domestic electricity customers in GB, through six monthly payments from October. EBSS will be delivered by licenced domestic electricity suppliers, on behalf of Department for Business, Energy and Industrial Strategy (BEIS). The discount will be automatically applied to bills in six monthly instalments (£66 x2, £67 x4) for the majority of customers, and those with traditional prepayment meters will receive this either via vouchers or Special Action Messages (SAMs) that can be redeemed against their top up token.

Assessment of EBSS GB against the Accounting Officer standards

Regularity

The EBSS grant is to be delivered through domestic electricity suppliers, through a Secretary of State Direction under s.7 of the Electricity Act 1989. The Direction, in combination with a Deed, and Ofgem Supply Licence Conditions, imposes legally enforceable obligations on all suppliers.

Spending authority is derived from the Supply and Appropriation (Main Estimates) Act 2022. Full budget cover has been agreed for the EBSS payments. Development of EBSS has been in accordance with the relevant HM Government policies including HMT Green Book guidance and Managing Public Money.

Overall assessment: My assessment is that the regularity test is satisfied.

Propriety

Given the size of the transfer of public money, via domestic electricity suppliers to households, many scheme design elements have been introduced to ensure there is sufficient protection of public money. Enforcement will be through a combination of Ofgem’s regulatory powers, as they relate to the supply licence conditions, and compliance with the Direction. Suppliers must meet several obligations for public money to be released to them. Steps have been taken to reduce potential for fraud at supplier and consumer level. Throughout the design of EBSS, concerns around protecting public money, fraud and customer experience have been overcome or significantly reduced.

Consideration has also been made to ensure the scheme delivers for Pre-Payment (PPM) customers, accounting for the various ways these customers track their consumption and spend and issuing cashable vouchers to those who would require it.

To ensure the highest possible uptake, the Direction requires that suppliers take additional steps with eligible PPM customers, such as repeated attempts to make contact and reissuing lost or expired vouchers.

Overall assessment: My assessment is that the propriety test is satisfied.

Value for money

Economic appraisal was undertaken to assess the value for money of EBSS in accordance with the principles set out in HM Treasury’s Green Book. The analysis underpinning the assessment was independently quality assured following best practice in the BEIS evidence framework.

The business case considered a long list of options and selected those that most closely align with the Government’s strategic objectives (e.g. energy affordability) alongside a baseline option using a multi-criteria analysis approach. This was followed by a more detailed short list of, Option 0) a do nothing scenario (counterfactual), Option 1) the previous announced £200 grant and future levy version of the EBSS (Announced in February 2022) and Option 2) the £400 grant only version of the EBSS (announced in May 2022).

Option 2 was selected as the preferred option, despite delivering a negative social net present value (SNPV), as the negative value is mainly due to the fact the SNPV includes the costs of negative externalities associated with increased energy consumption relative to the counterfactual and does not take into account considerable unquantifiable benefits. These include, preventing the exacerbation of health issues for individuals and supporting households, many of which would have to make difficult choices about where to prioritise their finances this winter. Given this, the quantified SNPV alone cannot be used to conclude on value for money. Consideration must also be given to the material unquantified benefits, and the alignment to the strategic objectives and critical success factors to deliver support to as many households as possible. In particular, the near universal approach of EBSS acts to minimise the risk of not supporting households in need over winter 2022, including those outside of scope of existing support measures, such as the Warm Home Discount.

Overall assessment: My assessment is that the value for money test is satisfied.

Feasibility

The design of EBSS has benefitted from lessons learned from an earlier scheme, the Government Electricity Rebate. Extensive industry feedback was collected from public consultation and a series of working groups. Many processes have been co-designed with domestic electricity suppliers and key operational challenges have been resolved, such as designing payment methods that will enable delivery to all customer types, including PPM customers. Ofgem readiness checkpoints (completed by all suppliers) indicate that the majority of suppliers will be in a strong position to deliver from 1 October. Work continues to address any remaining concerns.

The programme features on the Government’s Major Project Portfolio and is subject to regular IPA assurance reviews.

Overall assessment: My assessment is that the feasibility test is satisfied.

Conclusion

As the Accounting Officer for BEIS I considered this assessment of the Energy Bills Support Scheme and approved it on 16 September 2022.

I have prepared this summary to set out the key points which informed my decision. If any of these factors change materially during the lifetime of this project, I undertake to prepare a revised summary, setting out my assessment of them.

This summary will be published on the government’s website (GOV.UK). Copies will be deposited in the Library of the House of Commons and sent to the Comptroller and Auditor General and Treasury Officer of Accounts.

Sarah Munby
Permanent Secretary, BEIS
16 September 2022