Paying for the Energy Bill The hardest hit Ian Preston Centre for Sustainable Energy 3 rd 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 ( ) – 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 LosersWinners Electric£48£282-£258 Gas-£32£59-£166 Lpg-£58£6-£220 Solid fuel-£61-£1-£139 Biomass-£150-£14-£371 Oil-£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

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 ,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 ,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 ,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 ,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 ,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)