The Imbalanced Scales of UK Fuel Poverty
Some unsettling figures emerged from a survey published by consumer watchdog Which? on 19th September, showing that those who use low amounts of fuel are paying significantly more per unit than higher rate consumers.
26th September 2012 | Peter Rolton: Chairman, Rolton Group
This is due to systems such as the two-tier charge, which sees unit prices drop once a certain amount has been used. A steeper cost for low users is therefore to be expected, as this ‘good value for money’ will only benefit those who use a greater amount of energy, and does not deliver for those who are careful with consumption. As unhappy as some may be about this method, it’s not news.
What is, however, quite staggering is the difference in unit cost between users: the Which? report states that ‘energy companies are charging customers up to a third more per unit of gas or electricity if they are a low user… compared to those who use high levels of energy.’ The businesses involved highlight the fixed cost of getting fuel to the consumer as the cause for this discrepancy, but the huge disparity in surplus charges between one company and the next indicates that this cannot be the full story, and that profits are likely to play a bigger part than is being conceded.
Exposure of this inequality comes at a time when UK fuel poverty is becoming ever more pronounced: the DECC has predicted that the number of those affected could reach 8.1 million by 2016, soaring up by 4 million since 2010. The two-tier system isn’t the only one to ignore those most in need of discounted rates, either: other ‘money saving’ deals such as duel fuel agreements and direct debit discounts also exclude the poorest households, who cannot afford to take advantage of combining bills and paying for them simultaneously. Fuel paid for using coin-operated meters is also sold at a far higher premium than an equivalent amount pumped through on a standard tariff, and these again almost exclusively disadvantage those living in poverty, exponentially widening the wealth gap in the UK.
Now the Government is assessing a potential redefinition of ‘fuel poverty,’ moving away from its current understanding as a household which requires more than 10% of its total income after tax to keep warm. In the latest DECC consultation, dated 18th September, advice is taken from Professor John Hills of the London School of Economics, who has argued that a more precise measure would include only those households which have both a below average total income and an above average energy usage. Hills has advised that by 2016, fuel poor households will be paying an average £600 more than comparably sized, wealthier homes annually, and as such the issue is of urgent importance.
Redefining fuel poverty may be cause for concern, as this move risks excluding the thousands who use little energy because they cannot afford to use more, and there are questions being raised as to whether this is not simply an attempt to lower official numbers of poverty without offering any solution to the problem itself. Ed Davey, the Secretary of State for Energy and Climate Change, takes these criticisms into account in his foreword to the consultation, stating that ‘unless we properly understand the problem, we cannot design effective solutions.’
This statement has some merit; according to the current definition, wealthier people who simply live in very fuel-expensive homes may be classified as ‘fuel poor,’ which is misleading and reinforces the need for a more robust means of calculating fuel poverty. However, the proposed adjustment still carries a worrying threat of exclusion to those who may be in the most need of help. Year on year, the continual rise of fuel cost and the stagnation of incomes sees a greater number slip into fuel poverty, and without decisive action, the 2016 target to eradicate fuel poverty in the UK looks to be a highly improbable goal. This is why proposals such as the Green Deal are of huge importance, as they give homeowners the opportunity to improve the efficiency of their homes and therefore significantly reduce fuel consumption and cost without accruing any personal debt.
Home improvements have the most immediate potential to significantly relieve the effects of fuel poverty, but with relatively low promotion and the confusion surrounding terms for landlords and tenants, even the extremely promising Green Deal may pass its target audience by. The Government should be shouting about solutions like these; people can’t take advantage of opportunities they are not aware of.
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