Rates of fuel poverty remain disturbingly high, with too many households struggling to pay their bills due to low incomes, poor housing standards and, in recent years, higher energy prices.
This is the finding of a new study from the University of East Anglia’s Centre for Competition Policy which says the current approach to tackling fuel poverty is in needs of a “reboot”.
The report, titled Fairness in Retail Energy Markets? Evidence from the UK, covers five broad themes, including the long-term context for fairness in the retail energy market; the increasing complexity of the relationship between policymakers and institutions; the way in which people purchase energy; the detailed experiences of those at risk of fuel poverty; and how data and statistics can be improved.
The study identifies problems with standard definitions of fuel poverty and emphasises the need for more work “on the ground” to help target households in need of assistance. It recommends a much greater role for community groups and other local intermediaries who have the necessary knowledge and trust.
“We suggest that the current approach to analysing fuel poverty, and associated policymaking, would benefit from a reboot,” the report states.
“Focusing on directly observable real-world phenomena which underpin the complex problem of fuel poverty, for example, low and precarious incomes, cold homes and health issues, such an approach would encourage consideration of interventions beyond energy efficiency.”
The study also outlines issues around the data available to policymakers and how this can negatively impact customers, particularly those on low incomes.
It says the Living Costs and Food Survey (LCF) and its precursors suffer from serious measurement issues relating to the period covering the early-1990s to 2013. Information appears to be missing for a significant proportion of households with prepayment meters.
Estimates of some earlier studies which used the uncorrected data regarding the distribution of energy expenditure, energy consumption and emissions across households may be affected by this data gap.
“After applying a correction, central estimates of fuel poverty rates based on reported energy expenditures exceed official fuel poverty rates based on required (modelled) energy expenditure in some years,” the report explains.
It suggests that policymaking would be better informed if raw anonymised survey data from regulators was publicly shared by default to enable analysis by outside groups.
Furthermore, the report raises concerns over the diminishing independence of Ofgem due to the proliferation of its duties and its increased communication with the government.
It warns that this added interaction has led to greater opportunities for the government to informally “pressure” the regulator.
Speaking at the launch of the report, Ofgem chief executive Dermot Nolan said: “At this very point in time Ofgem is coming to the conclusion of the decision it is making on parliament’s decision to implement an energy price cap. We are doing so in the context where parliament and we ourselves have used the word fair.
“We’re very much at the cutting edge of this particular issue because fairness has been used throughout the debate of the legislation.”
Nolan added: “The Centre for Competition Policy’s work on fairness in energy markets is particularly important and timely. As UK energy prices have risen over the last ten years, public concern over the impact of this has also risen.
“Politicians, regulators and companies emphasise that prices must be fair, that there must be fair competition between different technologies, and that they must receive a fair hearing.”