The challenge of rising energy prices

This week, I attended a roundtable on energy policy organised by Consumer Focus on whose Board I sit. It was a fascinating event on an important topic with some very knowledgeable speakers from both the UK and elsewhere in Europe on both the top table and in the audience.

For UK consumers, the average household energy bill has doubled in the last seven years from £550 to £1,300 a year. Recent price increase announcements suggest that many households will soon be paying around £1,500 a year for their gas and electricity.

One ‘solution’ which is often mentioned is switching to another supplier who offers a better deal. But this is not an easy process even with the assistance of comparison web sites. We were told that the UK energy market currently has around 400 tariff options. No wonder that switching levels have fallen and that nearly half of those who switch move to a worse deal. The Government speaker at the roundtable was Energy Minister Charles Hendry who admitted that he himself had thought of switching but gave up when he found the process too complex. The regulator Ofgem is supposed to be working with the ‘Big Six’ suppliers to move to fewer and simpler tariff options. Monique Goyens of BEUC suggested that we we are in danger of moving from a situation of accusations of the industry mis-selling to blame on the consumer for miss-buying.

Another possible ‘solution’ is smart meters which was the subject of considerable discussion at the roundtable. The industry supports the  roll-out of smart meters because it should make it easier for them to balance supply and demand throughout the day and week. However, there were many criticisms: smart meters are not going to be available for some years because the roll-out programme is 2014-2019; the programme is costly and the cost is being borne by consumers while the savings are going to the suppliers; the meters will usually be in a position where consumers are in no realistic position to check the readings for different activities and times; even, then readings will show usage and not cost; even if a consumer can check the meter, the options for changing activity are limited since, while the dishwater or washing machine could be used at night, people’s meal times and heating requirements are not flexible.

Consultant Linda Lennard made the powerful point: “We are expecting consumers to fix a failed and failing market”. Retired academic Dr Brenda Boardman was particularly eloquent on the impact of rising energy prices on the poor: we are seeing more and more fuel poverty (more than 20% of income going to energy bills) with some 20-25% of homes now classed as fuel poor; the poor often pay the highest unit cost and pay up-front with the use of pre-paid meters; and the poor can least afford energy saving measures like insulation of cavity walls and lofts.

One Comment

  • Chris Colgan

    Energy prices are only a part of the problem. Alongside trying to make chages there we should also be lobbying for changes to the way in which houses are constructed. If we wer to take a leaf out of the new German houses that ar so thermaly effiecient that they need very little additional energy to heat them over and above body heat. In our lifetimes oil and gas shortages and massive price increases will change the ways we live and work. Actively working towards finding ways to reduce our dependency on oil and gas will become more and more improtant if we are to have any chance at all of keeping even parts of our current lifestyles intact. We have to start thinking outside the box and start investing time, effort and money towards our own future and that of our children and their children. Oil and gas are finite resources and the petroleum age could be one of the shortest recorded ‘ages’ of mankind. 200 years! A sobering thought that most people in the western world have probably not even considered for a moment. I don’t have the answers but I do have an ever increasing number of questions that I feel urged to ask of myself and those around me.


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