Paying for the Energy BillThe hardest hit

Ian PrestonCentre for Sustainable Energy

3rd September, 2013

• CSE and DIMPSA• Overall distribution of impacts• Beyond the mean• The hardest hit• Potential compensation packages

CSE 3rd August 2012

• Independent national charity established in 1979• Experience of practical delivery (CERT, ECO, GD etc.) with

complimentary policy analysis and research• Work with a range of sectors on climate change and fuel

poverty issues• Example projects:

– JRF, Distribution of UK Carbon Emissions: And implications for UK energy policy (2013)

– DECC, National Housing Model (2012-13)– Ofgem, Profiling low income, high consumption households

(2011)

Policy impact = Net decrease on

average across all income groups

Impact of policies on actual household energy bills in 2020, by expenditure decile and those that receive support

Headline findings (CSE) • With product policy• Total no policy bill in 2020

£1,335• Total bill in £1,304

LOWER BY£31 or 2%

Headline findings (CSE) • Without product policy• Total no policy bill in 2020

£1,335• Total bill in £1,427

HIGHER BY£93 or 7%

Average across all

households

Losers Winners

Electric £48 £282 -£258Gas -£32 £59 -£166Lpg -£58 £6 -£220Solid fuel -£61 -£1 -£139Biomass -£150 -£14 -£371Oil -£156 -£1 -£394

Change in energy costs by heating fuel

Impact of policies on actual household energy bills in 2020, by heating fuel and those that receive support

-£258

-£500

-£400

-£300

-£200

-£100

£0

£100

£200

£300

£400

Electric Gas Lpg Solid fuel Biomass Oil

Impa

ct o

f pol

icies

on

ener

gy b

ill in

202

0

By heating fuel

Households that do not get support

Average Impact

Households that get support

Beyond the mean• On average bills go down, but not for electric heaters

– These customers represent 10% market share, carry 20% of policy costs & get 7% of the benefits

– Finding is consistent with previous DECC & Consumer Focus work• Reductions in energy costs in 2020 depend on

– The success of policy, product policy is particularly important– Need ECO and the GD to deliver – Continuing support of the Warm Homes Discount (protects a

number of elderly and low income households)• Who are the hardest hit?

– Low income, high consumers (see our work for Ofgem)

• Overall increase of £335 by 2020• 300,000 householders• Median income ~£13.2k• Sticky customers (switching isn’t enough)• High levels of Council Tax Benefit

Lower-income, but some asset-rich older people in electrically-heated 3-bed houses in less urban areas (37)

• Overall increase of £240 by 2020• 490,000• Median income ~£14.3k• Sticky customers• Higher proportions in SW and Scotland• Over half rent (LA / PRS)

Low-income, mainly older single adults in small, electrically-heated rented houses (35)

• Overall increase of £172 by 2020• 860,000 householders• Median income ~£15.9k• Sticky customers• High proportion in London and SE• High levels of means tested benefits /

Council Tax Benefit

Low-income single adults, in small, urban, electrically-heated rented flats (36)

• Overall increase of £65 by 2020• 470,000 householders• Median income ~£18.0k• No policy winners at all (inc WHD)• More female households• No children• Owners or own outright

Low-income, low-consumption single adults, nearing or retired, in small gas-heated flats (40)

The hardest hit but not lowest income• Overall increase of £476 by 2020• 340,000 householders• Median income ~£20.0k

Average-income, electrically-heated houses in non-urban areas, with high occupancy working-age families (38)

Compensation policies• Levy policies on the gas bill – The ECO and WHD should be

levied more towards the gas bill. (Very Easy & Fast) • Make all off peak units unencumbered with policy costs –

creates a real price differential to time shift energy appliance usage (Easy & Fast)

• Target the hardest hit – Ensure the forthcoming Fuel Poverty Strategy and Heat Strategy also considers policies for compensating these households (Moderate time frame)

Compensation policies• Promoting modern NSH – install storage heaters to

electrically heated flats as a mechanism to balance supply and demand (Requires detailed work & moderate time frame)

• Free DSM units from policy costs – Make all demand side management units of electricity unencumbered with policy costs. (Requires detailed work & longer time frame)