Soaring energy prices and fuel poverty

Ben Saltmarsh, Head of Wales for National Energy Action, speaks out on fuel poverty in the midst of soaring energy prices.

Our homes should be warm and safe. Yet now more than ever, this isn’t the case. A toxic combination of exceptionally high energy prices, low incomes, and inefficient housing deny this to hundreds of thousands in Wales.1

Over the past 18 months, we have witnessed energy prices soar to unparalleled levels.

The UK Government’s Energy Price Guarantee – a subsidy on Ofgem’s price cap – is currently helping reduce the unit cost of gas and electricity so that a typical household in Great Britain pays, on average, around £2,500 a year on their energy bill.

However – as with Ofgem’s price cap – the exact limits vary, including depending on how you pay and where you live. The often-quoted £2,500 figure is a GB-average, for direct debit, based on typical consumption. Yet, there’s a big regional divide in unit rates and electricity standing charges. And Wales does not fare well.

All told, those in north Wales and Mersey continue to face the highest average costs in GB. Further, it’s currently more expensive if you prepay or pay on receipt of bills. And it’s always worth noting the EPG is not a cap on your overall bill. It’s not all-you-can-eat energy for £2,500 (or equivalent). Use more than typical consumption, you will pay more.

The personal impacts of high prices are acute

Points of important detail aside, average energy bills of £2,500 a year are not normal. They remain almost double what they were in October 2021. And the personal impacts of high prices on low-income and vulnerable households are acute.

While wholesale prices are now falling, energy bills look set to remain over twice the historic average for the rest of 2023, meaning being able to afford this essential service will remain a major, daily concern.

With deficit budgets and nothing left to ration, the poorest households have been facing desperate conditions. Forced to live in one room, because that is all they can try and heat. Eating cold food because they cannot afford to feed the meter. Often going without energy entirely, to the acute detriment of their health and wellbeing. Self-rationing. Self-disconnecting. Falling into overwhelming debt.

The severity of the energy crisis has prompted it to be one of the most prominent public policy challenges facing the UK in recent history.

Affordability is a long-term, structural issue

To its credit, in 2022/23 the Welsh Government provided an expanded package of welcome measures to help support those most in need, alongside the UK Government’s interventions.

However, low-income, vulnerable households now face a cliff edge in support as many of these schemes come to an end. The UK Government’s Energy Bills Support Scheme ended in March, and the Welsh Government’s Welsh Fuel Support Scheme closed in February.

With high prices here to stay into 2024, the need will still be there. The poorest households have already had their budgets devastated by successive rises, and more targeted crisis support will likely be required.

Further, affordability is not just a short-term issue. It’s a long-term, structural one. Alongside necessary steps to improve the incomes of the poorest households, there’s a need to rewire the energy market. To make it fairer and accessible, with deeper price protection to help make energy affordable for low-income and vulnerable consumers.

At the same time, there’s an urgent need to upgrade the energy efficiency of our fuel poor homes in Wales. Homes which cannot be kept warm at any reasonable cost.

Warm and safe homes are at the heart of tackling fuel poverty and achieving a fair and affordable transition to net zero. It’s been a year since the Welsh Government consulted on the future of its key delivery mechanism to tackle fuel poverty, the Warm Homes Programme. It’s crucial the next iteration provides guaranteed support for the ‘worst-first’ – those living on the lowest incomes, in the least efficient homes – lifting households out of fuel poverty as we insulate and decarbonise their homes.

The cheapest unit of energy is, of course, the one you don’t need to use. A programme to provide multiple, appropriate measures on a ‘fabric-first’ basis, promoted and delivered alongside holistic advice and support, would provide a permanent solution to lower bills.

The Minister for Climate Change said in November that a new demand-led scheme will be procured and operational before next winter. And we cannot afford to go another winter without it in place.

National Energy Action

National Energy Action (NEA) is a national fuel poverty charity, founded 40 years ago, working to ensure everyone can afford to keep warm and safe at home. It advocates to make warm homes a national priority, provides platforms for community-facing organisations to come together, and works with partners to support households in need, providing training and national qualifications covering key issues associated with fuel poverty, fuel debt, affordable warmth, and practical energy efficiency advice. See www.nea.org.uk.

1 In April 2022, when energy bills sat at an average of £2,000 a year, the Welsh Government estimated that up to 45% of households (614,000) in Wales were in fuel poverty. That included virtually all (98%) of our lower income households; over four in 10 of whom were estimated to be in deep, severe fuel poverty. At the time of writing, average energy bills sit 25% higher, at £2,500 a year.