The UK government is considering a “rising block tariff” (RBT) approach to energy billing, a model that would charge households a lower rate for an initial allowance of gas and electricity before increasing rates for higher consumption. This potential shift comes amid growing concerns about rising energy costs set to take effect in January, with industry forecasts suggesting an average increase of around £400 annually and sustained high prices through the decade.

Energy Secretary Miatta Fahnbulleh has emphasised affordability as a key priority, especially for vulnerable households facing steep cost increases. The government is expected to announce additional support in Chancellor John Healey’s upcoming budget, including £1 billion targeted at lower-income households this winter. Beyond immediate relief, Fahnbulleh’s department is exploring ways to fund the energy system more “fairly,” which has led to renewed interest in the RBT model.

Under a rising block tariff, all households would receive a basic allowance of energy at a lower price considered sufficient for essential needs. Usage beyond this block would be charged at progressively higher rates, effectively penalising heavier consumption. Proponents argue this system would offer greater savings to low-income households, who typically consume less energy. The Joseph Rowntree Foundation, for example, has suggested that government investment of £5 billion could help most households reduce bills, with the largest benefits flowing to light users.

However, a range of experts and advocates remain critical of the RBT proposal. Citizens Advice points out that low energy use does not consistently align with low income, noting that poorer households often rely on less efficient, electricity-heavy heating systems. This discrepancy challenges the fairness of using consumption alone as a proxy for financial need. Critics also highlight that certain groups, such as second-home owners, could unfairly benefit under this system simply by distributing usage over multiple properties.

In addition to equity concerns, the RBT model may clash with the UK’s evolving energy market, which increasingly relies on variable renewable power sources. Flexible tariffs designed to encourage consumption during periods of abundant, low-cost renewable generation could be complicated by tiered pricing structures. The model might also counteract national goals to accelerate adoption of electric vehicles and heat pumps, as raising electricity rates for higher usage could disincentivize the shift toward electrification.

Electrify Britain, an industry group advocating for increased electrification, has described block tariffs as “hugely counterproductive,” arguing that it is contradictory to encourage electric technology uptake while charging consumers more for higher electricity consumption.

These challenges have led many stakeholders to call for more straightforward solutions, such as improving social tariffs or discount schemes that better identify and support vulnerable energy customers without unnecessary complexity. While the rising block tariff remains under consideration, its practical and policy drawbacks suggest the government faces a delicate balancing act in designing an energy billing framework that delivers affordability, fairness, and supports the broader energy transition.