London, U.K. — (METERING.COM) — July 29, 2008 – In the light of high energy prices, which are likely to remain high, it is imperative that the U.K. government reviews its approach to fuel poverty and does so urgently.
This is the call from the parliamentary Business and Enterprise Committee which has just completed an inquiry into energy prices, fuel poverty and the role of the regulator Ofgem, following an increase in prices in early 2008 by the majority of the “big 6” leading energy companies in the U.K.
The committee says that other things being equal, high fuel prices will inevitably lead to an increase in fuel poverty, i.e. the number of households that spend more than 10% of their income on energy costs. Thus the time is right for a root and branch review of government policy on fuel poverty. Energy suppliers’ existing social assistance initiatives – which go well beyond specific tariffs – do not reach the vast majority of the fuel poor. They also vary widely, confusing consumers and providing inconsistent coverage. Irrespective of its broader conclusions on the role of such tariffs, the government should define the criteria for both the prices charged by suppliers under the banner of social tariffs, and for identifying those customers that qualify for them.
As energy prices are likely to remain high, the government will have difficulty in increasing incomes rapidly enough to eradicate fuel poverty and it will not be able to rely on ongoing subsidy of fuel bills. This means that in the future, government and industry efforts need to focus on improving the housing stock of the fuel poor as the most cost effective means of reducing both their energy bills and their carbon emissions.
The committee says that it believes there are issues in both the wholesale and retail markets that need to be addressed. In particular with gas-fired power accounting for about a third of the U.K.’s generating capacity the price of gas determines the wholesale price of electricity and ultimately affects the competitiveness of its energy markets as a whole.
While there is no evidence of any active collusion in the markets, it is clear that in a retail market dominated by six big players, it is easy for those players to make informed judgements about the behavior of their competitors, which can distort competition.
The committee says it believes smart meters would play an important role in facilitating competition in the retail sector by giving consumers better information about their electricity usage and cost, thus encouraging greater and more informed switching. The government’s decision on a rollout, due by the end of the year, should include a clear and urgent timetable for implementation.
Commenting on the report, energy watchdog energywatch said that the findings should shake the industry, government and the regulator out of any lingering complacency. “The market has been found to be deficient and failing consumers. The committee has mapped a rational and practical course to get the energy market on track. That course must be travelled," commented energywatch campaigns director Adam Scorer.