Yesterday, Daisy Cooper announced measures to cut energy bills. Under Lib Dem plans everyone would get £100 off their bills with more targetted support for, for example, households with disabled people or children or low incomes. Watch her speech here.

She said:

Energy is not a luxury. It’s a basic human need. It’s essential. Every single household in Britain should be able to afford their basic everyday energy needs regardless of what happens in global energy markets, and regardless of who happens to be sitting in Number 10.

For too long, governments have responded to every energy crisis with short-term schemes and sticking plasters, while big corporations have made a fast buck.

That is why we are going after the big energy network operators who are gaming the system, to fund our new Essential Energy Guarantee. It is an absolute scandal that a weak regulator has allowed these monopolies to make billions in windfall profits at the expense of bill payers.

Labour’s leadership contenders have a choice: turn a blind eye to the windfall profits of energy network operators and big banks, or step in to guarantee basic dignity for families. Commit to introducing our Essential Energy Guarantee within your first 100 days.

Our Energy Spokesperson, Pippa Heylings MP, added:

This opportunity is an open goal for giving families the energy bills relief they have been hoping to see for far too long. The unfair profits accumulated by energy network companies must be reigned in and used for the public good.

This is the newest part of a package of common sense policies put forward by the Liberal Democrats: solar on every new home, a new home insulation upgrade programme, breaking the link between electricity and gas prices, and removing the renewables obligation levy.

Time after time we have put no-brainer recommendations to this government but the pace has remained painfully slow. This time they must not sit on the idea, and instead save families struggling with the cost of living now.

The small print

The Essential Energy Guarantee was initially proposed by the Joseph Rowntree Foundation. Details about their proposal can be found here.

The policy introduces a discount on a set portion of energy, equal to 50% of what Ofgem defines as medium annual usage (“Typical Domestic Consumption Value” – TDCV). Medium annual usage according to Ofgem is 2,700 kWh of electricity and 11,500 kWh of gas. The 50% “essential” block of energy would be 1,350 kWh of electricity and 5,750 kWh of gas on an annual basis.

Families with children would receive an extra portion of discounted energy for each child.  Disabled people and the poorest in society, in receipt of means-tested benefits, would receive a discount on all of their energy usage.

The total cost of the policy is £3 billion a year. For its first two years, the policy would be funded in the following way:

• £2.5 billion a year would be raised by clawing back the unexpected £5bn windfall made by energy network operator companies under Ofgem’s RIIO-2 price control framework.
• Another £500 million a year would be raised through the windfall tax on the big banks proposed by the Liberal Democrats in September 2025.

Network operator clawback mechanism:

Energy network firms are the private companies who own the electricity and gas network (pipes, cables, pylons etc.) Because they are monopoly companies with no competitors, their profits are regulated by Ofgem.

A flaw in Ofgem’s “RIIO-2” price control framework has rewarded network operator companies with around £5bn in undeserved profits, which are over and above what Ofgem believes is reasonable. Ofgem mistakenly assumed that network companies’ borrowing costs would rise with inflation, but the companies had already locked in their borrowing at historically low fixed interest rates. When inflation spiked, this allowed network companies to pocket the difference.

The Institute for Public Policy Research recently recommended a mechanism to claw back this £5bn windfall. More information can be found on page 5 of their “Flex Factor” report. The Energy Security and Net Zero Select Committee also called for a clawback mechanism in October 2025.

What do we think of these plans?