Fuel Poverty

Fuel poverty is defined as having to spend more than 10% of income on domestic fuel to heat and power the home to an adequate level. Fuel poverty results in both debt and cold, damp homes that can cause poor health, discomfort and misery. The three main factors that impact on fuel poverty are domestic energy efficiency, household income and energy price.

It was first measured accurately in Scotland in 1991 and reached a high of 730,000 households in 1996. By 2003-4 this figure fell to just over 240,000 households, with the fall being mainly attributed to the lower prices of energy first brought about by the deregulation of the energy market. This was unsustainable and since then the cost of energy has continued to rise to such an extent that today the Scottish Government believes that there are over 800,000 fuel poor households in Scotland. Most experts believe this figure to be an underestimate and the figure is probably nearer 900,000 households (almost 40% of all Scottish households) now living in fuel poverty.

Ofgem have recently published a paper on eradicating fuel poverty and protecting vulnerable customers. With remarkable understatement they claim:

Competitive markets can deliver lower prices, better service and more innovative products than regulated markets, but some regulation remains necessary to protect vulnerable energy customers”.

As recent events highlight, there is little evidence that we actually have a real market, and it is certainly not delivering lower prices. But Ofgem has never let the facts get it the way of their competition ideology. This is illustrated in Ofgem’s own customer engagement survey that shows that only 13% of gas customers and 14% of electricity customers switched their supplier during 2011. This represents a third year of decline for gas customers and a fourth year of decline for electricity customers. In other words customers recognise that switching is not the solution and are fed up with the so called market. One positive from this paper is that energy disconnections have reduced dramatically. However, that probably reflects a move to self disconnection through pre-payment methods.

The Scottish Government has launched a new £50 million loan fund that will invest in green energy projects to help heat homes across Scotland. While welcome, it is another effort to spread limited funding thinly.

Norman Kerr, Director of Energy Action Scotland summed up the challenges at last week’s EAS conference, “It is important to ensure that all angles are looked at in the bid to end fuel poverty.  Technologies are available to improve the energy efficiency of homes, but better ways are needed to both inform and make them accessible to the public.  Who bears the cost must also be considered, as this currently adds to fuel bills.  Meanwhile, household budgets are under pressure and the effects are especially felt by those on a low income.”

 

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