1.3m households in fuel poverty get no help with insulation or boiler replacement
27 Oct 2013
OverÂÂ £430m of additionalÂÂ govtÂÂ support available for fuel poor if policy is improved
New analysis of the government’s flagship fuel poverty measure, the Energy Company Obligation, shows that it fails to help over half of all households living in fuel poverty with the cost of insulating their homes and replacing their old boilers.
With reforms to make the policy more efficient, £434m more could be available every year for the one million, three hundred thousand homes in greatest need who are currently missing out, according to new analysis by the think tank IPPR.
The new analysis comes after a week of fierce debate by politicians and ahead of the appearance of the Big Six energy companies at Parliament’s Energy and Climate Change Select Committee next week.
Reg Platt, IPPR Senior Research Fellow, said:
“With energy companies announcing inflation-busting price hikes, the Energy Company Obligation policy has a vital role to play by helping those households who are least able to cope with the increases. But the policy is poorly targeted and over a half of households in fuel poverty get nothing from it.
“Some energy companies with a track record of poor delivery want ECO to be loosened and the government has signalled it may row back. This would make a bad situation worse for poor homes, many of whom already have to choose between eating and heating.
“Instead the government should improve ECO by launching a street-by-street roll out of energy efficiency improvements, led by local organisations, starting in the lowest income areas. This would mean that all fuel poor homes can get support and the vast majority of the funds available would reach fuel poor homes.”
Notes to editors:
There are 2.39 million households in England who are fuel poor. A fuel poor household is defined as one whose income is below the poverty line and who has high energy costs, which is generally because they live in an energy inefficient home.
The Energy Company Obligation (ECO) obliges the six largest energy suppliers, including British Gas, EDF,E.On, Npower, Scottish Power and SSE, to deliver energy efficient improvements. The suppliers are expected to spend £540 million a year on improvementsin low income homes. They pass the cost on to their customers through energy bill increases.
£434m of the total £540m budget, or about 80%, is being spent on homes that are not fuel poor. This is because the way fuel poor homes are identified under the programme is highly inefficient. Having local organisations lead a street-by-street approach wouldmean only fuel poor homes receive improvements andsubstantially bring down the delivery costs.
The Prime Minister announced at Prime Minister Question’s that the government will “roll back” green regulations and charges funded through energy bills.
British Gas has called for more time to deliver their obligations under the Energy Company Obligation, claiming that this will reduce the costs of the policy. Ian Peters, Managing Director of Residential Energy at British Gas said: “We continue to urge the government to reform the programme… Carrying out the same energy efficiency measures over a longer time period would reduce the short-term impact on customers’ bills”.
IPPR analysis has showed that British Gas are delivering government policies less cost effectively than SSE:
• IPPR analysis of the SSE tariff rise on Oct 10th showed increases in government policies were responsible for £15 of their £93 increase (or 16%).
• British Gas claimed increases in the costs of government policies were responsible for £50 of their £123 tariff increase (41%).
• SSE are delivering government policies in a way that results in £35 less being added to the average bill this year than British Gas.
Ofgem is currently investigating SSE, British Gas and a number of other energy companies for failing to deliver their obligations under previous energy efficiency policies.
Analysis in IPPR’s report ‘Energy Efficiency: Who Pays and Who Benefits’ showed that of the ‘Big 6’ energy companies, British Gas, SSE and Scottish Power were the worst at delivering the government’s previous energy efficiency policy, the Carbon Emissions Reduction Target.
IPPR’s report also showed that the cost to suppliers of delivering energy efficiency policies has been far lower in the past than the Government presumed.
Analysis of the Energy Company Obligation was carried out by energy consultancy Verco for IPPR. IPPR will shortly publish a report containing the full analysis.
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