High bills force more UK homes into ‘fuel poverty’

Higher energy bills forced an extra 1m British households into “fuel poverty” in the space of a year, according to an official study.
Calculations by the Department of Energy and Climate Change, published on Thursday, showed a rising number of households compelled to spend at least 10 per cent of their annual incomes on natural gas and electricity.

The total grew from 4.5m in 2008 to 5.5m households in 2009, the latest year covered by government figures. Over this period, average retail gas prices rose by 14 per cent and electricity by 5 per cent.
Since then, energy bills have climbed by significantly greater amounts, leading campaigners to say that the number of “fuel poor” households will have risen still further. “Increasing energy costs create hardship for millions of the poorest pensioners, families and disabled people, leaving many cutting back on heating or other essentials,” said Audrey Gallacher, director of energy at Consumer Focus.

Last week British Gas raised its gas prices by 18 per cent and electricity by 16 per cent with effect from August 18. Including an earlier bill increase imposed in December, this decision will mean a 25 per cent rise in British Gas charges in the space of eight months.
Ms Gallacher said the result would be more households in “fuel poverty” in the course of 2011. If the other utilities raise their charges by sums comparable to British Gas, the total would then rise to 6.4m households, according to Consumer Focus.
The government has announced radical reform of the electricity market, designed to ensure that energy companies replace the UK’s lost generating capacity and reduce carbon dioxide emissions. The bill for new power stations and networks will amount to £110bn. The comprehensive overhaul of energy infrastructure which the government says is needed will cost £200bn.

Experts predict the utility companies will inevitably pass on this burden in the form of higher bills. Energy costs place a disproportionate burden on the old and the poor. In the private sector, manufacturing industry will bear the brunt.
“The sad truth is that consumers are paying a heavy price for this country’s disjointed, incoherent and unaffordable energy policy,” said Ann Robinson from USwitch, a consumer website.

Chris Huhne, the energy secretary, argues that he will save consumers money by reducing the UK’s dependence on costly fossil fuels. The government is introducing an energy efficiency scheme, known as the “Green Deal”, designed to improve the insulation of every British household at no charge. The cost will be covered by savings from future energy bills.

But energy companies rank among the most distrusted organisations in Britain and there are doubts over the likely take-up of the Green Deal.

FT