Energy and Climate Change Committee - Draft Energy Bill: Pre-legislitive ScrutinyWritten evidence submitted by Energy Action Scotland
Introduction
Energy Action Scotland (EAS) is the Scottish charity with the remit of ending fuel poverty. EAS has been working with this remit since its inception in 1983 and has campaigned on the issue of fuel poverty and delivered many practical and research projects to tackle the problems of cold, damp homes. EAS sits on the Scottish Fuel Poverty Forum.
EAS welcomes the opportunity to respond to the Energy and Climate Change Committee’s call for evidence on the Draft Energy Bill 2012.
Background: Fuel Poverty in Scotland
The Scottish Government is required by the Housing (Scotland) Act 2001 to end fuel poverty, as far as is practicable, by 2016 and plans to do this are set out in the Scottish Fuel Poverty Statement. However, of the three main causes of fuel poverty, energy efficiency is devolved to the Scottish Parliament, while both energy market regulation—including price—and income in terms of benefits and tax are matters reserved to the UK Government. Even within energy efficiency, GB-wide programmes such as the Carbon Emissions Reduction Target (CERT), the Community Energy Saving Programme (CESP) and the forthcoming Energy Company Obligation (ECO) are important vehicles for delivering energy efficiency measures in Scotland.
The number of Scottish households living in fuel poverty dropped from 756,000 (35.6%) in 1996 to 293,000 (13.4%) in 2002. Half the reduction was due to increases in household income, 35% to reduced fuel prices and 15% to improved energy efficiency of housing. The most recent figures from the Scottish House Condition Survey (SHCS) show that 823,000 Scottish households were in fuel poverty in September 2011—a figure which is equivalent to 35% of the total number of households in Scotland.
According to figures produced by the Scottish Government (SHCS), for every 5% rise in fuel prices an estimated 40,000 more households would go into fuel poverty. Based on these figures, EAS estimates that there are currently almost 900,000 households, ie four in ten, in fuel poverty in Scotland. This significant increase in fuel poverty is widely accepted to be due to the dramatic increases in domestic fuel prices and EAS is very concerned about the impact on vulnerable customers.
1. Impact of Demand-side Management
EAS recognises that the Draft Energy Bill 2012 focuses on large-scale energy generation and aims to adapt the market to changes in energy requirements. However, it is concerned that the Bill fails to emphasise the need for demand-side management to be addressed in parallel.
Plans for energy generation in the years ahead must, we believe, be equalled by plans to reduce significantly the amount of energy consumed and therefore the amount that is required to be generated.
The UK Government does of course have plans and programmes in place to tackle fuel poverty, reduce carbon emissions, to improve the energy efficiency of buildings and appliances, and to influence end-user behaviour through energy advice.
However, EAS would expect Government to demonstrate that such steps to reduce energy demand are sufficient over time to have the required impact on generation.
Acknowledging clearly this link and the impact of demand-side reduction should surely form the basis of any energy policy.
2. Mitigation of the Effects of Energy Price Rises
The Draft Energy Bill indicates that, although energy prices for customers will increase, they will be lower than if the steps proposed in the Draft Bill were not taken. Given that it is now widely acknowledged that energy prices for customers will continue to increase for some time, it is, we believe, essential that measures to mitigate the effects of such rises are increased likewise.
Already a high number of households are in or at risk of fuel poverty and this number is therefore likely to increase with prices. Many of the initiatives—be those to reduce carbon emissions, to increase energy efficiency or to upgrade the grid/networks etc—are paid for via customer bills. These are largely applied as flat levies, regardless of income, ability to pay or level of usage. If this regressive form of paying for initiatives is to continue—and EAS believes this could well be done more fairly via the tax system, then there ought to be sufficient mitigation for the third of customers already struggling to afford energy bills, for example by using some of the “carbon taxes” raised.
3. Role of Ofgem
The draft Bill also intends to change the powers held by the regulator Ofgem. At present, Ofgem’s powers of course relate to the gas and electricity markets. However, over the past number of years there has been increasing concern over “other fuels”, particularly in areas of the country that are off the mains gas grid. There has been much publicity over the last few winters in particular which has highlighted issues which existed previously but which went largely unseen—perhaps due to the lack of a single “voice” or representative body to raise them.
Whilst a recent OFT study reported that such markets were operating well, more or less, there remains concern that consumers of other fuels—such as coal, domestic oil, LPG etc—lack the same level of protection and guardianship as gas and electricity users.
Moreover, suppliers of such fuels do not necessarily contribute to improving domestic energy efficiency (CERT, CESP, ECO etc) or to supporting vulnerable customers (Priority Service Register, Warm Home Discount etc) as do the gas and electricity suppliers.
It is therefore our view that a role for Ofgem in protecting the interests of customers of fuel types other than gas and electricity should be considered in the Draft Energy Bill.
Energy Action Scotland is content for this evidence to be made public.
June 2012