UK energy billing

New research from UK insurer and consumer advisory Compare the Market has found that lower-income households, particularly those living in areas that constitute the poorest are paying three times more for energy in terms of percentage of disposable income, than their most affluent neighbors.

The disparity is due in part to more-than-half of UK households with an annual income of £12,000 or less, being billed on a more expensive standard variable tariff (SVT), or a prepaid system, resulting in the average annual cost of energy averaging at £1,123, per household. That 5.7%, or £60 more, than those residing the top 10% of the UK’s most affluent areas.

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A significant reason for the disparity is a difference in tariffs, with more than half of Britain’s lowest-income households either being on a Standard Variable Tariff (SVT) or a prepaid system, both of which offer higher pricing.

The report found that in the 10% most deprived areas of Britain, the annual cost of energy per household is £1,123. This is £60 per year or 5.7 percent more than the annual cost of energy in the 10% most affluent areas.

The report found that the 10% of households with the lowest amount of disposable income spent approximately 7.8% of their weekly disposable income on energy, which translates to triple the amount spent on energy bills by the top 10% of households with the highest disposable income.

The research analysed energy inequality across three metrics: deprived vs non-deprived areas of Britain; lower vs higher household incomes, and the percentage of household income spent on energy.

Peter Earl, head of energy at Compare The Market said “These findings indicate a pattern of inequality at the heart of the energy market.

“It is regressive that those who are most disadvantaged by higher energy bills end up paying more than those who can more easily afford it. While the difference in prices may seem small to some, for those struggling to make ends meet it isn’t small change, and month-to-month can quickly add up.”

“Encouragingly, there is a market solution to this issue, which is to urge all households with a standard meter to switch to a competitively priced fixed tariff deal. The energy price cap, far from being an affordable or good value price to pay for energy, is, in fact, hundreds of pounds more expensive than the cheapest tariff currently on the market.”

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