Fuel poverty in a season of good cheer
The world of energy in the last six months has been chaotic, to say the least. We find ourselves using that word ‘unprecedented’ again as we see a stream of energy companies fail, wholesale costs hit unforeseen heights, and the huge impact this has all had on customers.
Today is Fuel Poverty Awareness Day, coordinated by National Energy Action (NEA); a moment to remind us that millions of households will be struggling in fuel poverty this winter. Every year, we hear figures about excess winter deaths, caused by people being unable to keep their house warm. Heading into the winter of 2021, things look even more perilous, as falling income and increasing costs of living make this winter a particularly terrifying prospect. Rationing of energy is already common among low income families, who are faced with impossible decisions such as paying to heat their home or buying food..
At a time of year where many of us will be celebrating, sharing gifts and singing carols, for some people that sense of joy will be overcome with fear and worry.
According to NEA’s figures, the price of energy has increased by £235 per household for domestic customers in the last year. CAP’s own data shows a staggering 18% increase in energy debt per household in 2021 compared to 2019 (before COVID-19 took hold). All estimates suggest that this upward trend isn’t going away — in fact it is predicted to get worse, with the energy price cap expected to increase significantly in April, adding further financial pressure to family budgets. There are few who can confidently predict when this pressure will end.
It is not just customers feeling the brunt of the current state of things in the energy sector: the impact on suppliers has been making regular headlines as well. The failure of multiple high-profile companies has not only affected over 3.8m customers, but is a devastating blow to their employees. This is not just a situation that affects customers.
Ofgem and the Government have stepped in to make guarantees of customer supply during an energy company failure, which is encouraging. However, we also know that a large number of customers have already been self-disconnecting from their prepayment meters even prior to this period; in 2019, Ofgem estimated that one in ten customers had self-disconnected in the previous twelve months. Among CAP clients, that number was more than half of prepayment users. This is a problem that can only have become worse as finances have tightened.
So what next?
There remain a lot of unknowns. This is really the time when the Government has a decision to make: how actively involved in the energy sector does it want to be, or even need to be? Having effectively underwritten one energy supplier that was at risk of failure for the next few months, there is almost a sense that this could end up being like the family that buys a puppy for Christmas, but doesn’t quite realise in the long term how much time and effort the commitment needs. If Bulb’s financial crisis doesn’t have a solution in April, what will the Government do? Having already intervened once, will they do so further, or will they allow a supplier of that size to completely collapse? What sort of precedent would that set?
It is clear that what is needed now is some real leadership in the sector. The Government has indicated that it cannot sufficiently influence the wholesale cost of energy, and therefore other solutions are needed to support energy customers. The problem of affordability has been around since before COVID-19; household incomes have not increased to match living costs (which many sources say are only going to continue to rise). This is something that the Government can combat, whether through improving social security or enhancing the support offerings to low income households. This might be through improvements to the Warm Home Discount, or the introduction of a social tariff for energy.
As we take this time to remember those suffering in fuel poverty, those in power need to start to think about the long term future of the energy sector. There are a lot of questions with not many answers, and time is running out for those people who will lose their lives if more help isn’t given this winter.
