Time to ditch hot air and tackle fuel poverty

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By Jolene Cargill

While Scottish and Southern Energy announced profits and warn that its domestic customers face yet further hikes in energy bills, predictions about rising fuel prices across the board spells bad news for consumers. And it’s not just for this coming winter.

Next quarter fuel tariffs are expected to rise and it has led to warnings that up to a quarter of houses will turn heating off in the winter because they can’t afford the bills. If the predictions pan out more than 6 million households will be in fuel poverty in the UK – that’s a quarter of the country.

Fuel poverty is defined as having to spend more than 10% of income on domestic fuel to heat and power the home to a level of about 21 degrees. Low income and poor energy efficiency are contributing factors to fuel poverty – but rising domestic energy prices has been the main driver in the last 15 years, according to the Institute of Public Policy and Research.

It’s only going to get worse. The combined impact of increasingly volatile oil and linked gas prices, global demand from emerging economies like China, technical barriers in supply and climate change policies mean the upward trends are set to continue in future decades.

From current statistics we know around 810,000 Scottish households are affected. That’s 36% of total number of households or one in three. So, it’s now on a par with the incidence rate of cancer in Scotland.

Fuel poverty is particularly high in Scotland compared with other parts of the UK, due partly to severe weather and the higher proportion of properties that don’t have access to mains gas or are ‘hard to treat’. And the latest research shows that living in a cold home not only causes people money worries but that it has a devastating impact on their physical and mental health.

Wrap your head around the statistics and it’s easy to see we have a major economic and social problem on our hands. The amount of people who fall into the ‘Fuel Poverty’ camp is increasing. National Energy Action reported that 5.5 million people were in fuel poverty in 2010 and the numbers are snowballing this year. It has been predicted to rise another 500,000.

The Energy Industry won’t comment on scale price rises but British Gas admits wholesale prices will probably go up by around 20% this year. And The Bank of England recently warned that the higher utility costs expected will push inflation to 5%. So surging energy bills don’t just put pressure on already squeezed household budgets; it depresses economic growth. But are we doing enough to tackle fuel poverty?

While all the moves are towards loading more of the costs of energy efficiency schemes onto consumers there is unprecedented need in the short term for income support and price reduction measures for the growing numbers who can’t afford their rising bills; particularly in the wider economic context of an unstable labour market, welfare reforms and rising living costs.

Industry wide measures aimed at reducing bills for the most vulnerable and low income households are currently voluntary but change is on the horizon. Under the new Energy Bill making its way through the UK Parliament companies will be obligated to support low income and vulnerable households and support hard to treat homes.

Meanwhile, energy companies say they are spending millions on schemes that help vulnerable customers. Regulator Ofgem has confirmed that all major suppliers have exceeded voluntary targets agreed with the government on specific programmes to reduce the costs for low income customers in the last year. £130million of the total £157 million in 2009/2010 was spent on introducing social tariffs.

But there is still work to be done in making such schemes fairer; criteria between different suppliers vary widely as do techniques for identifying eligible customers. And for many in fuel debt the so-called ‘flexible options’ referred to by Energy Action the body which represents all companies in the domestic market don’t amount to more than a pre-pay meter which in real terms actually costs more per kilowatt than any other tariff.

Almost all prepayment gas and electricity meters are set at the supplier’s most expensive tariff. The energy suppliers say this is because of the extra costs the meters incur, such as the fees for collecting cash via Paypoint, Payzone and Post Office outlets, as well as the installation and maintenance of the meters themselves.

According to fuel poverty charity National Energy Action there are 5.8 million prepayment meters are in use in Britain. They tend to be used by lower income families such as those on benefits, lone parents or those with no bank account. So in effect the least well-off in society pay the most for their energy. This must be addressed if we are to have any hope of tackling fuel poverty.

The Scottish Government has a statutory duty to ‘eradicate’ fuel poverty in Scotland by November 2016 as laid out in the [Housing (Scotland) Act 200. And the UK Government is carrying out a review of fuel poverty due to be published in the autumn and aims to eradicate fuel poverty within 5 years.

In Scotland, as across the UK, publicly-funded programmes such as the Home Insulation Scheme and Energy Assistance Package do provide some relief by tackling poor insulation. In their manifesto the SNP Government pledged to set up a new £50m Warm Homes Fund – a major investment in home insulation – which will be on top of existing home insulation schemes, using cash from the Scottish Future’s Fund.

And in the first term of Government the SNP introduced the Energy Assistance Package, which provides energy advice, benefit entitlement checks and in some cases a package of insulation measures for those most at risk of fuel poverty including pensioners on pension credit. The numbers on a national scale seem impressive. £51 million was spent on EAP in 2009/2010 and the eligibility criteria was expanded to include households on certain benefits; with a child under 16, a pregnant woman, terminally ill and those on carers allowance.

It’s a start. We need to improve the uptake of rebates, as up to a fifth of people entitled to a rebate don’t claim. Besides, throwing money into the big public pot doesn’t always filter down to where it’s needed most; particularly for poorer communities hardest hit by unemployment and poor housing. Could it be time to consider that a narrow, target driven policy approach is failing to make real grassroots progress?

With the resounding optimism in the new majority SNP Government there is an opportunity to step up and stop tinkering round the edges of fuel poverty with yet more targets and take a look at the true impact of policies. The Scottish Fuel Poverty Forum was rocked in March by the resignation of Chairman Graham Blount who claimed he wasn’t informed about significant changes to the Homes Insulation Scheme and Energy Assistance Package. He also said the forum had been prevented from doing their job.

Policy makers need to ditch the hot air. Scotland has a chance to take a much more progressive approach to tackling fuel poverty that goes beyond the target driven paradigm; there’s much more to fuel poverty than whether a household has the latest boiler or insulation in the wall cavities. Fuel poverty is not a single issue but one that’s bound up with other social and economic trends and until we are making good in-roads with all of these compounding factors there is no point in waxing lyrical about eradicating it.

The introduction of minimum standards in housing and provision of decent affordable housing stock or a living wage to tackle the growing problem of in work poverty would considerably alleviate fuel poverty. Above all, it’s time for a coordinated consumer effort backed by the Government and regulator to challenge the industry when it comes to practices such as pre payment meters; a draconian measure which only further perpetuates the cycle of debt and poverty that we desperately need to break.