Energy and Climate Change CommitteeWritten evidence submitted by Chris March

Energy Tariffs for Domestic Customers

(A proposal aimed to reduce fuel poverty and fuel use while maintaining necessary profits for the energy suppliers.)

1. I write as a now-retired Dean of the Faculty of the Environment at Salford University and as a writer on environmental issues concerned with buildings, I have a particular interest in the problem raised by the conflicting needs to reduce both fuel use and to avoid fuel poverty in low-income households. I hope therefore, that my professional views on the subject may be of use in helping to formulate policy.

2. As things stand, there are three competing “lobbies” involved in the debate:

The energy providers who aim to make their target profit margins.

Those whose incomes are too low to achieve a reasonable level of light and warmth.

The environmentalists who want to see marked reduction in the consumption of fossil fuels.

3. These largely incompatible aims generate the current dilemma as to how all parties can be satisfied. What is clear is that the only available and effective tool to which to manipulate the outcome, is money: the cost of fuels.

4. At the moment there are only two cost bands for most domestic users: the more expensive for the first quantity of energy used, followed, by a less expensive for the remaining irrespective of the amount used.

5. The energy providers have argued that the initial amount consumed has to be higher because of their standing charges such as their meters etc. I see this is a red herring given that all that really matters to commercial enterprises is that the annual profit made, is in line with that required by their boards and their shareholders.

6. The energy users are equally anxious to have energy prices as low as possible so that, in spite a global need to cut fuel usage, they can use more of it to achieve higher levels of comfort. This, in particular, is true of those energy users who are disproportionately disadvantaged because of low incomes.

7. How to reconcile these contradictory needs.

8. My solution would be to reverse the current tariff regime by having the lowest rate for the first quantity of energy used with the costs continually rising through successive cost bands. Those with the lowest incomes would be better able to achieve decent levels of comfort with the lowest or lower cost bands.

9. At the same time those whose usage took them into the higher bands would pay more for their fuel and would be inclined to be more economical, thus off setting the additional consumption by the once-fuel-poor. They may indeed choose to invest in proven energy-saving technologies already ion use in the commercial world.

10. Meanwhile energy suppliers would find that the profits lost amongst their poorer users would be similarly offset by the higher prices incurred by those better able to afford them.

11. Designing these bands as to what level of consumption, their boundaries and their cost would have to be worked out and is beyond my remit and experience—though not beyond that of others. It may be seen as interfering with the market place, but if price control of the drinks industry at the point of sale is being considered, there may well be a precedent for this. And the benefits might be even more significant.

12. 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.

13. 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 used to live in (Rosendale and Darwen Constituency) and currently in Ramsbottom, 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.

14. 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.

15. I hope the committee find these comments useful.

February 2013

Prepared 26th July 2013