Social tariffs recommended for U.K. energy market


London, U.K. — (METERING.COM) — May 11, 2007 – Discounted social tariffs could help lift millions of consumers out of fuel poverty and government should direct energy suppliers to provide such tariffs for their poorest and most vulnerable consumers, U.K. gas and electricity watchdog energywatch says.

In a new report following a consultation on the nature of social tariffs in the energy market, energywatch says that successive price rises between 2003 and 2006 saw average U.K. domestic gas bills increase by 94 percent and average electricity bills by 60 percent, resulting in average household energy bills exceeding £1,000 ($2,000) in 2006 and an additional one million vulnerable households being pushed into fuel poverty in England alone. While subsequently some price reductions have been announced, and a number of suppliers have come forward with various socially oriented products, the lack of a blueprint or common point of reference in the development of these products has led to confusion for those consumers who stand to benefit.

Fuel poverty is defined as needing to spend more than 10% of income on gas and electricity.

energywatch proposes in its report that government should introduce legislation that obliges suppliers to offer ‘Energy Assistance Packages’ aimed at tackling fuel poverty on three fronts – with a social tariff to address the price of energy, the provision of support for the heating and energy efficiency requirements of the dwelling, and referral for benefit entitlement checks.

The organization also proposes that each supplier is assigned a binding target on the number of households to deliver social tariffs and other component parts of the Energy Assistance Package to over a given period.   

On the funding of the social tariffs, energywatch says that without adequate funding from either government or the industry, cross-subsidy represents the only realistic choice for ensuring that the social tariff element of the proposed Energy Assistance Package can happen on the scale required to bolster progress towards the government’s target of eradicating fuel poverty in vulnerable households by 2010. However, this can be achieved with a modest, non-punitive impact when spread evenly across the whole customer base.

energywatch says it believes that the social tariff model it recommends has the potential to deliver significant assistance to eligible households and to complement and bolster existing fuel poverty initiatives.