The Fuel Poverty Commitment
The Warm Homes and Energy Conservation Act 2000 required the Government to publish and implement a strategy setting out policies to ensure that 'as far as reasonably practicable' persons do not live in fuel poverty. This objective was to be achieved within a fifteen-year period following publication of the strategy. The strategy was published in November 2001 giving a target date for the eradication of fuel poverty in England of November 2016.
The Government now has six years in which to meet the first two of its targets for eradicating fuel poverty and twelve years in which to meet its final objective:
. An end to fuel poverty for vulnerable households by 2010
. All social housing to comply with the Thermal Comfort criterion of the Decent Homes Standard by 2010
Until recently things had been going well with regular reporting on fuel poverty showing welcome progress in reducing numbers of fuel-poor households. The first real setback for the Government's ambitions has now appeared in the form of recent significant increases in both gas and electricity prices. This development, allied to other policy initiatives that will impact on energy price, will require a more radical approach than has previously been adopted.
A difficult task ahead
Falling energy prices and rising incomes have both contributed significantly to fuel poverty reduction with a smaller part taken by improvements to the energy efficiency of the housing stock; now the challenge is to sustain the progress, not only as a result of price increases, but also as it becomes clear that residual fuel poverty will be the most difficult to deal with. A Technical Note to Defra Public Service Agreement 7 - Fuel Poverty suggests, alarmingly, that perhaps 20% of vulnerable households may not be removed from fuel poverty because they refuse assistance or because little can be done to help them.
Affordable warmth for all
NEA takes the view that Government must use all feasible means to end fuel poverty rather than seek to exploit the 'reasonably practicable' provision of the Warm Homes and Energy Conservation Act. It should not be overlooked that one of the four main priorities of the 2003 Energy White Paper, and this is stated without any equivocation, is to 'ensure that every home is adequately and affordably heated'.
The full range of relevant policy instruments must be employed to address cases of fuel poverty where solutions are expensive, or technically complex or outside the scope of current Government thinking.
Current energy efficiency grant programmes do not address fuel poverty. The success of Warm Front has been measured purely in terms of the number of households receiving grants - no matter how minimal the assistance may have been.
The Energy Efficiency Commitment, whilst stipulating significant savings in the homes of a 'disadvantaged' priority group, has carbon reduction as its main objective. Other energy efficiency activity, such as work undertaken by local authorities to meet the Decent Homes Standard, has not incorporated any fuel poverty targets. The number and variety of domestic energy efficiency programmes makes for confusion on the part of the householder and inefficiency and wastefulness within the programmes themselves.
There should be a single national domestic energy efficiency programme providing energy audits and practical improvements to all householders across all tenures. The programme should offer all technically feasible and cost-effective measures and with the level of assistance based on ability to pay.
Hard to heat homes
These are primarily homes that are expensive to heat because they are off the mains gas network and/or because their building characteristics, for example solid wall construction, make it difficult to install cost-effective insulation. Rather than classing such homes as beyond assistance the Government must start to test and implement a range of possible solutions:
. Maximum cost-effective extension of mains gas provision to housing - funded through a windfall tax on oil and gas producers
. Insulation of solid walls, internal and external, should become an option under a national energy efficiency programme that integrates Warm Front and Energy Efficiency Commitment funding.
. Initiate pilot schemes to assess the potential of renewable energy to remove individual households from fuel poverty.
. Expedite trials of innovative sustainable energy technologies for the domestic sector with a view to large scale implementation by 2007
. The welfare benefits system must provide interim assistance for low-income households' fuel costs until their homes can be affordably heated.
The Warm Homes and Energy Conservation Act specifies energy efficiency improvements as the primary means of reducing fuel poverty. However it is acknowledged that heating and insulation measures will not resolve fuel poverty in all cases. More than 40% of fuel-poor social sector tenants occupy properties that comply with the Thermal Comfort criterion of the Decent Homes standard, although this is mainly due to the inadequacy of the heating and insulation provision required by the standard.3 In cases such as these, and others where energy efficiency improvements cannot provide a complete solution, it will be necessary to provide assistance through the welfare benefits system. This should involve the reintroduction of heating subsidies which were a significant feature of the social security system until the late 1980s. These should include:
. Formal designation of specific property types and heating systems as hard-to-heat
. A hard-to-heat subsidy for occupants of these dwellings who are in receipt of a means-tested benefit
. An additional benefit payment to occupants of all properties without central heating
. Extension of the Winter Fuel Payment to include those non-pensioner households who are currently eligible for Cold Weather Payments4
Debt and disconnection
Since privatisation of the domestic gas and electricity industries and the development of competition the Government has relied heavily on the market to deliver lower prices and, consequently, contribute to the reduction of fuel poverty. The worst potential excesses of a free market driven by the need to maximise returns on investment for shareholders are mitigated by regulatory powers to prescribe, guide and sometimes intervene to protect consumer interests.
The regulator, Ofgem, sets out a range of social obligations to be met by energy supply companies, these include: a comprehensive range of payment methods; sensitive treatment of customers in difficulty; impartial and competent energy advice; and special provision for vulnerable households. In general, this mixture of encouragement and exhortation has improved company practices although, depending on the viewpoint, it may be interpreted as interference with the most efficient working of the free market or, on the other hand, as Government delegating duties and responsibilities for the welfare of its citizens to commercial agencies.
Recent issues of some concern to fuel poverty campaigners have included the continuing practice of imposing a surcharge on prepayment meter users who already struggle to pay fuel bills, and the seemingly relentless decline in Fuel Direct5 as a payment method of last resort for low-income households.
Perhaps the single most contentious issue in gas and electricity provision is the power of companies to disconnect customers from supply. The Energy Retail Association has recently announced revised procedures that are intended to provide better protection from disconnection for vulnerable householders. NEA believes that no procedure can be free from human or computer error and that the complete removal of the right to disconnect (as is the case with the water industry) is the only acceptable policy for a modern and humane society. NEA advocates:
. An end to company powers to disconnect any home from gas or electricity supply
. Prepayment charges to be set at no more than those charged to credit customers
. The appointment of a Working Group including representatives of Ofgem, the energy industry, the Department for Work and Pensions, energywatch and NEA to examine how Fuel Direct can be transformed into an effective payment method applicable to a much wider group of consumers
1. Vulnerable households are defined as the elderly, families with young children and disabled people or those suffering from a long-term illness.
2. These will include higher electricity generation costs as a result of increased use of renewable energy and carbon abatement measures such as the EU Emissions Trading Scheme.
3. Analysis carried out for the Fuel Poverty Advisory Group by the Office of the Deputy Prime Minister, 2004.
4. Household in receipt of income Support or Income-based Jobseeker's Allowance with a disability premium of with a child aged under five.
5. Money is deducted from Income Support of Income-based Jobseeker's Allowance and paid direct to electricity and gas suppliers to cover debt repayment and ongoing consumption.