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Feeling the heat (or not)

A fifth of UK households suffer fuel poverty while energy giants cash in.

Last month, secretary of state for energy and climate change Chris Huhne issued the government's latest energy report. The Electricity Market Reform (EMR) white paper makes clear how keen the Department of Energy and Climate Change (DECC) is to promote investment in gas, despite the fact that the fossil fuel's prices are currently sky-rocketing.

In the same week, DECC published its annual fuel poverty report. This highlights the significant rise in fuel poverty between 2008 and 2009 (most recent figures), with DECC predicting that figures for 2010 and 2011 will have increased further due to ongoing rises in energy costs.

The schism between the two government reports is striking and signals a worrying trend in the British energy market that sees energy corporations taking advantage of the rise in wholesale gas prices to exploit the British consumer to an unprecedented degree.

A household is defined as fuel poor if it spends more than ten per cent of its income on fuel to maintain adequate levels of warmth. Since 2003, soaring gas and electricity prices have been too great to be offset by rising incomes or energy efficiency measures, leading to year-on-year growth in fuel poverty (Fig. 1). In 2009, the number of fuel poor households in the UK was approximately 5.5 million, a rise of around one million from the previous year. In other words, more than a fifth of all UK households are now living in fuel poverty.

Figure 1 - Fuel poverty in the UK, all households and vulnerable, 1996 to 2009

A

Source: DECC Fuel Poverty Statistics 2011

Where gas is concerned, energy firms have blamed enormous price increases on the 30 per cent rise in wholesale cost. However, consumer price rises go far beyond this. Wholesale costs are nowhere near their 2008 peak yet consumer prices are at an all-time high. Energy consumers are therefore being exploited by energy firms at a time when they most crucially require support.

Today, E.ON became the fourth of the six major energy firms to announce increases in its gas and electricity prices, the second rise this year for the company. Scottish & Southern, British Gas and Scottish Power have already announced further price rises.

One of the most worrying outcomes is the impact that this is having on the elderly. Almost 50 per cent of those living in fuel poverty are over 60. Last December, George Monbiot underlined the severity of the UK's failure to address this disgraceful problem:

Although we usually have one of the smallest differences between winter and summer temperatures at these latitudes, we also have one of the highest levels of excess winter deaths. Roughly twice as many people, per capita, die here than in Scandanavia and other parts of northern Europe, though our winters are typically milder. Even Siberia has lower levels of excess winter deaths than we do. Between 25,000 and 30,000 people a year are hastened to the grave by the cold here - this winter it could be much worse.

More widely, the majority of households experiencing fuel poverty are statistically "vulnerable", in other words they contain the elderly, children or someone who is disabled or has a long term illness. In England, over 70 per cent of households are classified as such.

There are several steps that must be taken to address the escalating problem of fuel poverty. For a start, it is fundamental that energy regulator Ofgem starts to assert itself in the face of criminal price hikes. With one of the least regulated energy markets in the developed world, very little will change until the big six are brought under much tighter control.

Investment in energy efficiency measures and implementation of green energy programmes are likewise going to be fundamental to addressing the longer-term energy crisis, particularly in a world needing to get to grips rapidly with climate change and diminishing natural resources.
The energy giants currently have what seems like free reign to do as they please. It's time to tell E.ON and co. to F.OFF.