Researcher: Forget trading numbers over energy bill savings; the government needs to build fairness into energy policies
A new report that finds consumers with electric heating are paying most for government energy policies has challenged government predictions that the average household will save £166 on its energy bills by 2020. But one of the researchers behind the report says the numbers shouldn’t distract from the need to address fairness in energy policymaking.
Consumer body, Consumer Futures, has published research by the Centre for Sustainable Energy on the impact of energy policy on consumers’ energy bills, examining different groups by expenditure. The report, entitled ‘The hardest hit’, says the government’s policy of charging for changes to the UK energy system mostly through electricity bills disproportionately affects those who have electric heating – many of whom are among the worst-off in society.
Much of the press coverage has focused on the discrepancy between the report’s predictions of savings from policies and those of the government. But Ian Preston, a senior analyst at the centre and one of the report’s co-authors, says:
“Unfortunately, the press has missed the overall message from the report which is that of fairness in policy design. Instead, newspapers have tried to focus on the largest bill changes for a minority of households or any discrepancy in the figures between ourselves and DECC. For me the important point is that we’re paying for a range of targets through our bills, but most of this is loaded onto our electricity. If you use electricity to heat your home, a larger amount of your bill will go toward paying that.”
Understanding the numbers
Unlike DECC, which predicts consumers will save £166 on their energy bills by 2020, the reports suggests that government energy policies will reduce the average household energy bill in 2020 by £31 or two per cent.
In a time when consumer bills are rising dramatically, the Daily Telegraph is by no means alone in wanting to highlight how much people are going to have to pay for their energy. But its coverage of the report highlights how this focus might detract from the central message. The paper’s original headline focused on the fact that Consumer Futures believes some consumers will see a £500 increase in their bill as a result of the government’s policies.
Preston points out that these consumers are in fact some of the best-off in society, so their increasing bills are the result of high consumption. He says this group has the means to take advantage of measures like the Green Deal, so is not the focus of the research.
The Telegraph later changed its headline to highlight the difference between DECC’s calculated savings and those made in the report. But Preston points out that the savings aren’t calculated in the same way and therefore come out very differently.
Preston says:
“We try to mirror the Department of Energy and Climate Change (DECC)’s calculations as closely as we can, but some differences remain”.
For example, while DECC calculates savings from policies starting in 2002, the reports says it begins the analysis in 2010 – meaning the savings are much less.
Uneven savings
Consumer Focus’s report shows the calculation of average savings belies a stark difference in how the policies affect different groups in the population. It found that consumers who use electricity to heat their homes will see an increase in their bill as a result of policies, while all other consumers would see a decrease.
The research says households with electric heating “might be expected to receive measures to offset the particularly high costs they face” – when in fact, they may not have access to them.
Measures such as energy efficiency can have a big impact on the amount they are paying on their bills. Those who do receive policy support through measures like the Energy Company Obligation, which provides insulation and boiler replacements for lower income households, can expect to be over £500 better off, as the graph below demonstrates.
Image - Screen Shot 2013-06-06 At 14.26.04 (note) Source: Consumer Futures
DECC has defended its own calculations, saying its policies will help consumers. For example, the Warm Home Discount is helping over two million households a year, while the Green Deal should help people install more efficiency measures and ECO is helping install efficient boilers and insulation in the most vulnerable households. It adds:
“We will consider Consumer Futures’ research carefully, but it does not take account the fact households – including those with electric heating – will continue to save money with energy efficiency measures installed before 2010. Our assumptions on products are also not based on expectations of a change in consumer behaviour. We do not assume or require that people replace products any faster than they already do.”
Consumer Futures’s research follows a report in March by the Joseph Rowntree Foundation, which warns that the price impact of placing additional costs of energy efficiency schemes and other policies on consumer bills is disproportionate for the poorest 10 per cent in society. It says one problem with policies such as the Green Deal is that they require ready money – or the ability to borrow it -to take advantage of them.
Preston says he hopes the research will help highlight a group that he believes is still falling through the gaps when it comes to government support:
“Instead of looking at savings the average household might make, government needs to look at who might be disadvantaged disproportionately right at the start, and ensure that they are not adversely affected.”