Fuel poverty is a moving target, Ofgem please take note.

14th Jan 2019

 

It’s not often I take a pop at the regulator, Ofgem, but this week I will do.

The gas networks, under Ofgem’s regulatory settlement RIIO, are obliged to extend the gas network to help tackle fuel poverty. It is a laudable policy. It is also a very cost effective way of tackling fuel poverty. If I was in charge of Ofgem, I’d be more ambitious in this field.

That said, targeting fuel poor households is not a precise science. They don’t raise a flag, literally or metaphorically, to indicate fuel poverty. Up until recently, the GDNs were able to use geographical areas (those living in areas of multiple deprivation) as an indicator. Ofgem didn’t believe the targeting was precise enough and changed the eligibility criteria.

This tightening assumes that being in fuel poverty is a permanent state of affairs; and that once a gas connection is made to a property then it is problem solved. Unfortunately, the real world is not like this. Firstly, there is a huge amount of “churn”, that is households moving into and out of fuel poverty each year. Secondly, and a partial cause of this churn, the proximity to the fuel poverty threshold in the UK is so tight, that over-precise targeting misses an opportunity to do real good.

In an excellent article by the BEIS fuel poverty team (unfortunately hidden in a bigger document), the scale of this churn and the closeness to the threshold is explored in detail. The conclusions should make Ofgem sit up and take note.

Relating to England only, BEIS predict that in one year (2016 to 2017) 410,000 households moved out of fuel poverty while 270,000 moved into it. Given that approximately 2.5 million households are calculated to be in fuel poverty at this time, then these are significant numbers.

Regarding proximity to being in fuel poverty, the data is sobering. Over half a million households were within £30 of the fuel poverty costs threshold (300k just above and 240k just below); around 1.7 million were within £100 of the threshold (930k just above and 780k just below).

Given the amount of churn and recognising just how tight the threshold is, should suggest that relaxation of the Ofgem rules may actually help those who aren’t in fuel poverty today but may well be tomorrow.

 Best wishes

Mike Foster, CEO

 

Mike Foster

EUA's Chief Executive

 

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