Written evidence submitted by Professor Aimee Ambrose, Sheffield Hallam University, Professor Lucie Middlemiss, University of Leeds, and Professor Mari Martiskainen, University of Sussex (WIN0016)

 

The authors are submitting this together as members of the Fuel Poverty Evidence project, an academic collaboration co-led by the University of Leeds and Sheffield Hallam University to conduct research into fuel poverty, energy efficiency, and net zero transitions.

 

Question 2: What more could have been done to prevent price shocks being passed to consumer bills?

 

  1. Better targeting of support would have been helpful. There was quite a lot of support given universally, whereas people on lower incomes would have benefitted more from larger amounts of support. In our research we noticed a new emphasis on how different people's experiences were this year. Qualitative insights included noting that all but essential spending was constrained, and most people were at least rationing heat, if not avoiding heating altogether. If support was better targeted some of the pain experienced by those on the lowest incomes could have been avoided.

 

  1. Providing social tariffs for those on lowest incomes and in fuel poverty would also have prevented some of the harsher consequences, and ensuring the building stock is energy efficient would make it, and therefore those living in it, more resilient to price shocks.

 

  1. More should be done to ensure energy companies cannot profit from the back of consumer bills. Measures to limit profiteering and streamline supply chains for fossil fuels are crucial. Currently, fossil fuels change hands multiple times before reaching the end consumer, each transaction adding to the cost. It is imperative to simplify these supply chains to minimize unnecessary expenses. Ofgem's price controls on distribution costs, which can constitute up to 16% of customer bills, should be revisited to ensure they are effective in preventing excessive costs.

 

  1. Furthermore, a comprehensive review of standing charges, as recommended by the Regulatory Assistance Project, is necessary. Assessing the regressive nature of standing charges and considering the progressive approach of shifting these costs into general taxation could help distribute the financial burden more equitably among consumers, thereby preventing price shocks from disproportionately affecting those with lower incomes[i].

 

Question 3: How should energy companies respond if customers cannot pay their bills and what actions should they not have recourse to?

 

  1. Energy companies cannot continue to prioritise revenue protection over improving affordability for households vulnerable to fuel poverty. If customers are reaching out to their energy provider over affordability concerns, then their trust needs to be rewarded. An inability to pay should act as a way into conversations about how domestic energy efficiency might be improved through insulation and income maximisation support, not a trigger for punitive measures (such as PPMs) which will lock the customer into greater vulnerability to fuel poverty in the long term[ii]. Allocating a percentage of the extraordinary profits made by energy companies into programmes for, e.g. retrofit, would have longstanding and significant benefits.

 

  1. Additionally, making energy a basic universal service would put it in the same category as health service via the NHS, for example.

 

Question 4: Has Ofgem got its priorities right in addressing customer protection?

 

1.      Ofgem's understanding of the dynamic nature of vulnerability has traditionally been strong. Notions of who is vulnerable in relation to energy bills have been challenged by the recent energy crisis given that we saw a near doubling of households in energy poverty between 2020 and 2023, drawing households not previously vulnerable to fuel poverty into it. Our research shows that many more people than previously thought can in fact be at risk of fuel poverty[iii].

 

2.      This suggests that we need to expand our concept of who might be vulnerable to fuel poverty in the context of price shocks. The work of the Users TCP by IEA Annex on Hard to Reach Energy Users (led by Sea Rotmann) provides vital and challenging evidence regarding who might be considered hard to reach in an energy context, and inter alia, identifies the narrow demographic of those working in energy policy as a significant barrier to the accurate identification of vulnerable energy user groups and an even greater barrier to understanding their lived experience[iv].

 

3.      It also needs to be recognised that many people face multiple forms of vulnerability which is not always obvious from the outset.

 

Question 5: How effective is the Government's approach towards supporting the sector and delivering a functioning energy market?

 

1.      Investing in new fossil fuel projects will only lock us into further volatility. Our research shows that a net zero society can help reduce fuel poverty[v]. It is therefore key that net zero is delivered and so we need to double down on the transition to low carbon energy. The fairest way to simultaneously galvanise and ease the transition to low carbon is to commit to bridging the cost gap between gas prices and electricity prices for heating for a set number of years (until the point where the two are equal or electricity is less) for the lowest income and most vulnerable households, thus creating a safe route out of future vulnerability to fuel poverty for those households.

 

August 2023

 

 

 

 

 

References


[i] Sunderland et al (2020) Equity in the energy transition: Who pays and who benefits?, Rap Online:  https://www.raponline.org/knowledge-center/equity-in-energy-transition-who-pays-who-benefits/

[ii] Ambrose, A., Baker, W., Batty, E., & MacNair Hawkins, A. (2020). "I have a panic attack when I pick up the phone": experiences of energy advice amongst 'hard to reach' energy users. People Place and Policy Online, 14 (1), 58-64. http://doi.org/10.3351/ppp.2019.3479427335

[iii] Martiskainen, M., Hopkins, D., Torres Contreras, G., Jenkins, K.E.H., Mattioli, G., Simcock, N. (2023) Eating, heating, or taking the bus? Lived experiences at the intersection of energy and transport poverty, University of Sussex, https://hdl.handle.net/10779/uos.23721165.v3  

[iv] Rotmann, S., Mundaca, L., Castaño-Rosa, R., O’Sullivan, K., Ambrose, A., Marchand, R., Chester, M., Karlin, B., Ashby, K., Butler, D., and Chambers, J. (2020) Hard to Reach Energy Users, e-book: https://userstcp.org/wp-content/uploads/2019/10/HTR-Task-Literature-Review_EBook.pdf

[v] Dossett, Stuart (2022) Green Uplift: How a net zero economy can reduce fuel and transport poverty, Green Alliance: https://www.creds.ac.uk/wp-content/uploads/Green-uplift-2022.pdf