One of the most intractable aspects of policy in recent years has been the tension between energy costs and the need to transition to more sustainable and secure energy sources. Populist groups across Europe have zeroed in on spiralling energy costs as a way of inciting dissatisfaction with prevailing political and economic policies. This is unnecessary, and prevents progress on urgent transformations of society and economy.
The Universal Energy Service achieves three objectives in a single policy. It drives down household energy costs; rewards careful energy use; and it moves the costs of the energy transition from consumer bills to national taxation.
Free Tier
The programme removes all standing charges from domestic energy bills and provides a Free Tier basic energy allowance that insulates a third of households from consumption charges.
Every household gets 66% of a health-based comfort standard applied to a typical dwelling (13,800 kWh), plus another 15% for each child up to a maximum of two children. Usage above that level is charged at 3.37 times the current rates split between electricity and gas. Off-gas-grid homes can choose a fuel voucher or take all of their free tier as electricity.
Each element enables and depends on the others. Moving the system costs in standing charges off bills allows the suppliers to provide free tiers. The free tier stimulates energy efficiency. The efficiency saves households and the nation money. Without the design, sequencing, and taxes, the policy is impossible.
Households that keep their energy use low will make the most of their Free Tier. If they get their use below their allowance, they will not be billed for their energy use: £0 annual energy bill, worth £1544 (on average, at 2026 cap rates). Households that make no efficiency savings will still benefit from a reduction thanks to the elimination of standing charges (average £310).
The Universal Energy Service could also be a contributor to overall national and planetary savings, using the model’s central case for demand response results in:
- 3.7% reduction in domestic demand (15 TWh)
- 0.8% fall in territorial emissions
Progressive levies
Because policy levies are in the consumption rates, households within the Free Tier pay no network costs, no policy levies, and no wholesale energy costs. Policy levies remain in the unit rate for above-tier consumption, but their distributional impact is transformed: they operate as a progressive charge on discretionary consumption rather than a regressive flat tax on essential energy use.