How to alleviate rising fuel poverty

 

Fuel poverty numbers are rising. If you spend more than 10% of your income on gas, electricity or heating oil the you are officially classed as being in fuel poverty. The Government imposed an obligation on itself to abolish fuel poverty. In 1996 there were 6.5 million households in fuel poverty. Those numbers declined to about 2 million in 2003 and 2004, due to two main reasons; first and foremost energy prices declined over that period while incomes marginally rose in real terms. Secondly, the government committed tax payers’ funds to measures to alleviate fuel poverty. Fuel poverty is now on the rise with nearly six million households threatened with falling into fuel poverty by the end of next year, despite all the measures that have been introduced.

The measures mainly consisted of providing free insulation under various schemes, which provided some degree of protection. If you keep heat in the home and do not waste it the home does become less expensive to heat. But insulating old homes provides help at the margins; it will make a home less expensive to heat but will not help anyone who cannot afford the basic fuel cost, except by making the home less cold. Insulation as important as it is, saves heat and does not generate energy.

The average home costs around £1300 in energy each year. The average home is heated by gas and powered by electricity. Gas bills account for nearly £900 each year and electricity bills account for the rest. You can save electricity by installing low energy light bulbs and using fewer of them and by restricting your use of appliances. It will not be pleasant but it will not be life threatening.

It is harder to save on heat. The recommended temperature for living rooms is 21 degrees Celsius and for other rooms 18 degrees Celsius. Richer people usually heat their homes to higher temperatures than these; if you cannot afford the heat you will turn down the thermostat to levels well below these, and if you are old frail or ill, you will have to hope for the best.

The rocketing cost of gas, electricity and heating oil is what will cause hardship and send the fuel poverty figures up to six million, where they were 12 years ago. Since 2000 the government claims that it has spent more than £20 billion on fuel poverty alleviation. It is difficult to see how we have got value for money if, as far as fuel poverty is concerned, we are back where we started.

Most of the fuel poor have difficulty in making their gas and electricity payments promptly. As a result may of them are forced onto pre payment meters by their energy suppliers. This means that the household pays for its fuel in advance. The energy company gets the benefit of the money up front.

This does not give those on pre payment meters a low tariff – quite the reverse. Energy companies claim that it costs more for them to service pre payment meters and therefore they have to charge the poorest people the highest unit cost for heat and power. So we have an iniquitous situation where the poorest pay the most for a basic necessity of life – energy.

It is difficult for the Government to do anything to correct this iniquity. Fuel poverty charities have been calling for the energy companies to change this for many years but the Government refuses to regulate and the regulator refuses to protect the poor.

I have always thought that the basic way that we pay for electricity and gas and heating oil is wrong. If you are a big user you can get discounted rates, and this means that the people that use the most fossil fuel and the people that create the largest amounts of carbon dioxide emissions and pollution in the atmosphere actually are subsidised for doing so by the poorer smaller carbon footprint people.

This makes about as much sense as giving the four by four car owner a cheaper rate for his petrol than the owner of the smallest most efficient engine. We ought to make the polluter pay and this must also include the household polluter.

I suggest that energy suppliers are required to have just one tariff – a stepped tariff. The first so many kWh should be almost free, the next slice should be at a market rate and everything above that slice should be at a much higher rate. This could be easily administered on an annual basis and ought to be combined with an obligation to install remote readable smart meters so that a householder can keep track of his or her energy consumption and make informed decisions based upon the way in which individual consumption is panning out.

In addition a one off capital expenidture on renewables – solar water heating and solar heating support, air source heat pumps would reduce fuel bills. Just solar water heating alone would save around £150 each year for average users and soalr heating support would save a few hundred more, depending on the installation.

Following these recommendations would not cost a fortune but it would mean a change in the fundamental way that we think about energy. It would also turn energy suppliers into mere service vehicles, just a short step away from taking them back into public ownership, and given the essential and critical importance of energy, that is no bad thing. It would reduce the numbers in fuel poverty and give us control over our own energy – just like many of our European partners.