The report, ‘The Hardest Hit’, investigated which type of household would benefit and which would lose as Government energy policies are rolled out. Because energy policies are paid for mainly through our electricity bills, those households that use electric heating, but do not benefit from various schemes and policy initiatives, will bear a greater share of the cost.
‘The Hardest Hit’ calculates the average benefit to consumers of energy policy to be £31 by 2020 rather than Government estimates of £166 (3), which includes the benefits of policies introduced from 2002. Consumer Futures also warned that Government estimates of the contribution of ‘Products Policy’ (4) – more efficient products and appliances – to reducing consumers’ bills could be unduly optimistic. DECC should therefore assess the impact of policies on bills if consumers take up of new products is lower than predicted.
Consumer Futures estimates 2.1 million low income households (5) may be significant losers from current Government policy. These consumers are difficult to identify precisely. However, the research found that there are two groups that are particularly likely to lose out – consumers in purpose built flats with electric heating, consumers in any type of property with electric heating including pensioner households. Consumer Futures suggests the Government should target support at these two groups.
By 2020, the research predicts electrically-heated households will:
· represent 11 per cent of consumers by heating fuel type
· pay 19 per cent of the total cost of the Government’s energy policies
· receive 7 per cent of the benefits of energy policies
· those not receiving benefits will see their bills go up by an average of £282 per year, as a result of energy policies
· this compares with an average decrease of £31 per year for all consumers, as a result of energy policies.
Adam Scorer, Director of Policy at Consumer Futures said:
‘The conclusion of the report is not surprising. Most of the Government’s policies, such as the Renewables Obligation and EU Emissions Trading Scheme, are funded through electricity bills. That means that households with electric heating will face a disproportionate share of the costs. Many will be protected from such costs by benefits such as energy efficiency, microgeneration technology and bill discounts. But for those who are not protected, the impact on their bills will be significant.
‘Energy policies should provide benefits to many consumers, but as they are rolled out they will also create clear winners and losers. Some of those losers will be hit hard, and will not be in a position to absorb some significant bill shocks.
‘There is a real danger that heroic assumptions about the benefits of product policy could perform the function of an energy policy comfort blanket, providing an illusory sense of security and cost saving. Consumer cannot afford such over generous policy assumptions.
‘The best way of protecting these households is to provide energy efficiency measures that reduce their energy costs. The Government should target support at those households most affected and least able to cope with higher costs.
‘The Government must use the current Energy Bill and forthcoming Fuel Poverty Strategy and Heat Strategy to provide greater protection to those who rely on electric heating, but who cannot rely on current protections against the cost of energy policies.’
NOTES TO EDITORS
Consumer Futures represents consumers across regulated markets. We use evidence, analysis and argument to put consumers at the heart of policy-making and market behaviour. We speak up for consumers of postal services across the United Kingdom, of energy across Great Britain and of water in Scotland. Further information www.consumerfutures.org.uk
For further information or to arrange interviews with Adam Scorer Consumer Futures Director of policy and External Affairs, contact: Ann Gill Telephone: 020 7799 8004
1. The research was carried out by the Centre for Sustainable Energy using their DIMPSA modelling tool (Distributional Impacts Model for Policy Scenario Analysis). The Government uses the same tool for its own analysis of the impact of its energy policies. The CSE analysis looks in more detail at the ‘winners and losers’ from policy than that carried out by the Government. http://www.consumerfutures.org.uk/reports/the-hardest-hit-going-beyond-the-mean-a-report-by-cse-on-the-impact-of-energy-policy-on-consumers-bills
2. Relevant Energy Policies that will increase consumer costs include EU Emissions Trading Scheme, Carbon Price Floor, Energy Company Obligations, Renewables Obligation, Electricity Market Reform, Feed-in-Tariffs, Warm Homes Discount and Smarter Metering
3. The Hardest Hit only includes savings from measures introduced after 2010. DECCs own calculations include savings from measures introduced in 2002 (EEC-1, EEC-2, all of the CERT programme and savings from boiler regulations also introduced in 2002.
4. Products Policy assumes that consumer will purchase a greater number of energy efficiency products and that will substantially reduce consumer bills
5. The research used statistical modelling to predict the consumer groups who are most likely to lose out. They consist of 4 distinct groups who collectively add up to 2.1m households:
a. Lower income – but some asset rich older people (ie pensioners living in big family homes) – 295k
b. Low income, mainly older single adults in small electrically heated rented houses – 487k
c. Low income single adults in small urban electrically heated rented flats- 858k
d. Low income, low consumption single adults, nearing or retired in small gas heated flats – 470k
6. Consumer futures identifies the winners and losers
Figure A.1. Impact of policies on energy bill by heating fuel and those who do and do not receive support
7. Government calculations assume that energy policies will reduce the average household bill by 11% or £166