Fuel poverty: Ed Davey pledges to fight rising energy bills

Energy Minister accuses critics of the Government’s social and environmental policies of 'misleading' public

Energy Minister Ed Davey today pledged to fight rising energy bills at The Fair Energy Summit held in London.

He told electricity and gas company bosses, regulators and consumer groups at the Summit, arranged by The Independent and Policy Review Intelligence, that: “Ensuring that consumers get a good deal is one of my top priorities.”

And he took on critics of the Government’s social and environmental policies head first accusing them of “being misleading over the true impact of [the policies] on energy bills”.

A report from think tank IPPR published on the morning of the Fair Energy Summit suggested that the new Energy Company Obligation (ECO) will leave two million fuel poor households out in the cold.

ECO will oblige energy suppliers to improve the energy-efficiency of fuel poor homes to tackle fuel poverty and reduce carbon emissions. But IPPR predicts that fuel-poor household that don’t receive support will be pushed further into fuel poverty.

That’s because ECO may increase the cost of energy-efficiency policies above the £50 that current policies ad to the average bill to as much as £116, IPPR reckon.

But Mr Davey said: “Energy companies have been suggesting that ECO will increase bills. I believe there is no good basis for this claim.”

“We estimate the overall cost of ECO at an average of £1.3bn per year – that’s the same as the current supplier obligations. So ECO should impose no new costs.”

He said that uncertainties about cost estimates are the fault of energy suppliers. “One of the key difficulties in reaching estimates has been the lack of transparency from the energy companies.

“They have not given us a clear picture of how much they were spending to comply with previous obligations. And we don’t know what costs they’ve been passing through to consumers.”

He demanded that the energy companies start to play their part in tackling the growing shame of fuel poverty, after a report also published on the morning of the Summit by the Government’s Fuel Poverty Advisory Group suggested 300,000 more people could fall into the fuel poverty trap by Christmas.

But Phil Bentley, UK boss of British Gas, said at the Summit that government, too, must play its part.

“The better targeting of Winter Fuel Payment would, alone, make a significant difference in helping to tackle fuel poverty,” he claimed.

Meanwhile, Tony Cocker, chief executive of E.ON UK said: “The Fair Energy Summit was an important event as it highlights our belief that we must all focus on people not just prices. As today has shown, the more all participants in the energy debate help consumers understand why energy costs are going up the more likely they will be to get engaged with managing their own spending.”

Nigel Mason, business development manager of Co-operative Energy said: ”The only way the big energy suppliers will win back consumers' trust is to be completely transparent about their costs, including their energy costs, which will only happen if they are forced to buy and sell all their energy on the open market, so that customers can see fair play.“

Reg Platt of the Institute for Public Policy Research said at the Summit: “We need to stop the blame game on rising energy prices. Government needs to make sure its energy efficiency policies are as cost effective as possible. But it is vital to recognise that energy efficiency is by far the cheapest way to tackle fuel poverty and reduce emissions and we need to do everything we can to make sure that the Government’s new policies work.”

Following the Summit, Policy Review Intelligence called on both energy companies and the Government to do more to deliver a fairer energy deal for consumers.

“It is understandable that there are concerns with regards to the rising cost of energy and the fairness of the energy market – it is important that these concerns are addressed,” Said Gavin Hayes of Policy Review Intelligence.

“The key challenge is finding solutions to ensure that consumers have the confidence that they are paying a fair price for the energy they use; that they are receiving a fair service from their supplier and they are getting a fair deal from Government.  If trust on this basic level can be improved, then it will be easier to engage customers in checking their tariffs and improving energy efficiency levels.”

In order for consumers to have the confidence that they are paying a fair price for energy and to ensure greater fairness across the energy market, Mr Hayes believes that energy suppliers and the Government should sign up to the following Fair Energy Commitments.

Fair pricing:

- Energy companies should be obliged to offer their customers the best tariff available to them.

- Energy companies should commit to phasing out all practices of predatory pricing – this should specifically mean abolishing any loss leader tariffs, so that all customers have the confidence that they are paying a fair price and not subsidising others.

- The Regulator should also commit to stamping out predatory pricing by using its existing powers of enforcement.

- Energy companies need to keep things simple – including committing to no more complex pricing structures, limiting the number of tariffs to give the best balance between simplicity and choice and making bills as easy to understand by the customer as possible

- The Government should commit to ensure that all taxes raised from energy are spent on energy, to make sure that energy taxes are appropriated and used fairly.

- The Government must ensure that the reforms outlined in the Energy Bill that directly impact on the price or service that customers receive from their energy company are clearly explained and communicated to them in simple and easy to understand terms.

Market fairness, transparency and diversity:

- Energy companies must be completely open and transparent about their business activities.

- In the interests of greater fairness, transparency and market liquidity all energy companies should commit to gradually phasing in the auction of all their electricity supply and purchase all their electricity demand on transparent markets and further commit to work with the Regulator to improve liquidity in the market.

- The Government should continue to reduce the barriers to entry to the energy supply market for new providers, in particular tapering the thresholds at which the full licence conditions apply to small providers and ensuring that no customer is disadvantaged by any exemptions that apply to small providers.

Energy consumption and efficiency, tackling fuel poverty and support for vulnerable groups:

- All energy companies must take both their environmental and social responsibilities seriously, specifically including providing help and support for their fuel poor customers through the ECO scheme – recognising that increasing the energy efficiency of homes is by far the best way forward in tackling the energy cost challenge.  Current energy efficiency measures are simply not sufficient – the Government’s own impact assessment estimates that with Green Deal and ECO only between 125,000 to 250,000 households will be lifted out of fuel poverty by 2023 - a more vigorous programme of investment, starting with the areas of poorest quality and thermal efficiency, is needed – energy suppliers need to play a greater role in ensuring this happens.

- The Government should bring forward the current 2018 date by which all private rented properties must be brought up to a minimum energy efficiency standard rating.

- All energy companies should adopt the same wide criteria for the £130 Warm Home Discount and actively encourage their customers most in need to apply for it.

- The Government should look into whether targeting the current £200 winter fuel payment would be a more effective way of assisting households most in need.

- As part of its climate change and energy efficiency strategy, the Government should ensure that energy literacy is included in the school curriculum.

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