Energy and Climate Change Committee - Draft Energy Bill: Pre-legislitive ScrutinyWritten evidence submitted by Chris March

Energy tariffs for domestic customers

1. There has been much talk recently about energy costs and fuel poverty. I have over the last few years thought long and hard about these issues (Although retired now I was the Dean of the Faculty of the Environment at Salford University and have and still write on environmental issues concerned with buildings)

2. Perhaps my thoughts might be of use in formulating policy.

3. Suggested outcomes required:

Energy providers need to make proposed profit margins

The less well off need affordable heating and lighting

The environmentalists require a reduction in the use of energy

4. Currently there are only two cost bands for most domestic users: the more expensive for the first units used followed by a less expensive for the remaining irrespective of the amount used.

5. The proposal is to reverse the current tariff regime by having the lowest rate for the first quantity of energy used and increasing cost bands as more energy is consumed.

6. The energy providers have argued that the initial amount consumed is higher because of standing charges such as the meters etc. My argument is that this is a red herring, all that matters is that the annual profit made is in line with that required by the companies and their shareholders.

7. There is clearly a significant issue about fuel poverty accepted by all political colours. By providing an initial cost band of sufficient width and cheap enough to be affordable, should go a long way to alleviate this problem for a majority of those currently suffering. Clearly if fuel is cheaper, then those currently being very economical with its use will consume more resulting in greater depletion of energy resources.

8. However, by having several bands of usage, increasingly more expensive as more is used, there would be a disincentive to heat and light rooms and spaces not in use acting as a trade off against the higher consumption by the less well off. Indeed there may well be a further spin off in that users will invest in proven technologies generally in use in the commercial worlds such as passive lighting.

9. The size of these bands and their cost would have to be worked out and I would not be presumptuous enough to make any suggestions as to what they should be, not being an accountant/economist or having the detailed information. However it should not be beyond the wit of man to work these out in conjunction with the energy providers and other interested parties. It may appear as interfering in the market place, but if price control of the drinks industry at the point of sale is being considered, there would seem to be precedence for doing this.

10. If members of the committee accept the logic of my proposal, may I suggest that rather than say ‘how do we achieve this’ the question be put in another way. Let us assume that we have achieved the outcome and then ask the question ‘how did we get here?’ The disadvantage of the former question is that people will try to find reasons why it cannot be achieved whereas in the latter, the mind set is now positive.

11. It is appreciated that the proposal does not fit in with the Green Deal, which relies on an expensive lower tariff to ensure that the costs of insulation are repaid as fast as. However one of the limitations of the Green Deal is that it does not help all those in fuel poverty. For example, in the area I live in (Rosendale and Darwen Constituency), a significant amount of the housing stock is of solid stonewall construction, which cannot be easily or cheaply insulated and much of which is privately owned. For the occupiers of these properties the Green Deal will either not apply or will still leave many in fuel poverty.

12. I believe that the proposal that I have put forward deals much more comprehensively in tackling fuel poverty than the Green Deal. However, it does beg the question on how the installation of the housing stock can and should be improved. The Green Deal, if the lower rate of return identified above is accepted, could be a partial answer, but it will be necessary to find the funding for a retrofit insulation programme elsewhere. It is interesting to recall a levy was imposed on all cement sold which funded the Concrete and Cement Association for its research for decades. Maybe something similar could be considered, but I am moving away from my field of expertise so it would be presumptuous to develop ideas further on this.

13. I hope the committee find these comments useful.

June 2012