A report published by home services company Homeshift shows the extent of the problem of fuel poverty in the UK, despite the government having pledged back in 2000 to put an end to it by this year.
An individual is living in fuel poverty according to the UK Warm Homes and Energy Conservation Act if they are “a member of a household living on a lower income in a home which cannot be kept warm at reasonable cost”. In England, this is taken to mean any household that cannot heat their home to a decent standard without ending up below the poverty line as a result. In the rest of the UK, the general rule of thumb is that a household that spends more than 10% of its total income on heating and fuel is in fuel poverty.
According to figures from the now defunct Department for Energy and Climate Change published in June this year some 4 million UK households were living in fuel poverty in 2014. Home shift’s analysis of these figures suggests that this year, while that number will fall, some 2.6 million homes across the country are still set to be unable to reasonably afford to heat their homes this winter.
The problem is exacerbated by the fact that “fuel poor households need to pay £371 more per year to keep their house warm” than the average household would. This is down to a combination of typically less energy efficient homes, and (often inherited) expensive tariffs – including the many households on prepayment meters. Households with prepayment meters typically spend £226 more per year than households paying by direct debit, according to Homeshift’s research.
Part of the problem is that a huge number of households (66% according to Ofgem’s latest figures) are still on expensive standard tariffs. Standard tariffs, which most end up on either when their fixed rate term ends, or when they move into a new property and don’t actively changed to a fixed rate plan, are typically the most expensive offered by any suppliers, with the difference in annual cost between them and the cheapest offered ranging from £250-£300.
Ofgem recently published data showing the amount that households could save not just by switching from one supplier to another, but from switching from a standard tariff to a better fixed rate deal with the same supplier.
The biggest difference in cost between the most and least expensive tariff offered by one supplier was £261, with Npower, while Co-operative Energy came in a close second with a £245 difference.
This latest data release from Ofgem comes not long after four energy providers (British Gas, SSE, E.On and Good Energy) announced that they would freeze prices for their standard variable tariffs for the duration of the winter. This came after Greg Clark, the business and energy secretary, discussed with many providers claims that they had been profiting excessively from the large number of households on standard tariffs.
Steps have been taken in recent months to try and address the number of households who are left on standard tariffs largely due to lack of engagement with the market. Measures coming into effect include the CMA’s proposal to make a database of the details of any customers who have been on a standard tariff for more than three years available to rival companies who can then offer those customers cheaper, better deals.