When power brings poverty

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Or why a billion pounds invested in energy services may leak out through the breaches

All of us in Europe are used to live under the everyday pressure of publicity: mobile operators offer new tariffs, discounts on trendy phones or presents for loyal clients. It seems now is the time for energy distributors.

We used to think that light and heat in our houses is an essential part of everybody’s live, is a good everybody has a right to have wherever he or she lives. Probably you are still thinking that light and heat, as well as potable water, should be available in everybody’s house, whatever the level of incomes of a consumer. But have you ever thought, when buying bottled water, that this product has nothing to do with the right to common access to water? Now we are starting to consume perfectly packed and attractively designed heat and electricity packages as well. Have you receive a call from someone offering you to choose your electricity provider or tariff plan? And, to say the truth, have you ever paid less after changing your mobile provider?

The liberalization of energy markets, an ongoing process during the last decades in all European countries, was to bring consumers better prices and services. The reality is that new oligopolies, operated by a few energy providers, have appeared again. As a rule, those companies don’t own any energy sources (gas, oil, coal), but the infrastructure giving the access to the final consumer, and this way they can manipulate the prices we pay. At the same time, fuel producers from abroad, which could provide lower prices, can’t enter the local European markets. Taking into account where Europe gets the energy from, it is clear why this regulation has so strong political implications.

Due to the growth on the world energy markets, we have a situation where households find it more difficult each day to pay their bills. In the UK, one of the richest countries in the world, more than 10% of the population (or 4.5M families) can’t allow sufficient heating during the winter. It’s precisely why in 2001 a new term, fuel poverty, appeared . It is said to occur when a household needs to spend more than 10% of its income on fuel use in order to heat a home to an adequate standard of warmth. It’s clear why the elders, the youth and other socially unprotected groups are the first to become “fuel poor”.

Maybe the term is not very suitable, especially taking into account the fact that there are millions of people in the world who have neither access to electricity nor to commercial fuel sources for heating and cooking. Around a thousand people were killed this winter in Afghanistan by an abnormally cold winter. It’s an example of a fuel poverty on a different level. Anyway, even in the richer Europe, poor people are becoming poorer again.

In the UK, the part of their income that poor people spends on energy and utilities is almost 4 times higher than those of the richest. Even though Russians, by this characteristic, are poorer than fuel poor Brits. It doesn’t matter that Russia is richer with natural fuel, just the incomes of people there are lower.On the other hand, even in well-being Sweden and Canada, households spend more on energy than those from UK.

Eurostat gives comparable data on this issue only for 1999. Even so, it’s obvious that in UK, households used to spend less than in 2006 and less than in almost all EU countries. On the other hand, the poorest 20% of families used to spend a share two times bigger than the richest 20% on light and heating. It was the biggest gap in all Europe. The same gap in Sweden was very narrow.

Many British houses use prepayment meters, which let companies avoid user’s debt. You buy a magnet card in any store (for instance, for 5 or 25 pounds) and insert it into the meter. From that moment you may use electricity only within available limit. A bit like a pre-paid mobile phone, actually. The criticism against PPM is that the person paying for a card is actually paying for its manufacturing, distribution, retailer’s interests and so on. The meter operation isn’t cheap either. But this purely English system is not going to disappear in brief: there are millions of unregulated migrants in the country who just can’t legally have a bank account. The regulators have advised suppliers to install “smart meters”. These meters, which would mean an end to estimated bills, send more accurate information about energy consumption directly to the supplier, in real time. With these meters supplier can stop and start energy provision remotely.

But the main issue concerned a taxation of windfall incomes, which companies get when oil prices strikes the ceiling or when making a good deal on the CO2 emissions market. The government affirms that “the big six utilities” (Eon, EDF, Centrica, RWE, Npower, Scottish and Southern, Scottish Power) spend only a 0.1% of their billion-pound annual turnover helping vulnerable customers, when the new windfall tax could give more benefits for them.

Utilities have appealed that this tax will impede the construction of new stations and provoke energy deficits on the growing market. It seems a very bizarre polemic for a country which aims energy-efficient economy, in simple words, one consuming less kW and emitting less CO2. But the most interesting fact is that FOE (Friends of the Earth), one of the most influential European environmental organization, has backed this very controversial idea, and proposed even more controversial measures to strike energy poverty. Among others: a direct windfall tax to decrease the income tax for individuals, subsidise up to a 50% of household budgets to insulate houses, abolishing taxes on new cars to accelerate the shift to low carbon vehicles. It’s immediately clear that these initiatives make a vast field for corruption or improper budget spending.

On the other side, most utilities position looks at least more constructive and realistic. The Mail published the very typical story of 80 years old Harry Pointer, who’ve been living without central heating and had a 1500 pounds debt from using his electric heater. The provider has decided to insulate his house and install energy-saving equipment to give him a chance to get out of debt by decreasing his monthly fees. EON also announced that it was offering over 70% free insulation and energysaving equipment, such as low-energy light bulbs. Npower advisers work with customers to set up a payment plan they can afford and free attic and cellar insulation are available.

The Warm Front, a scheme designed by The Department for Environment, Food and Rural Affairs (DEFRA), and tested in one of the British counties, is another example of productive government-business cooperation. Warm Front obtained competitive quotes through European tendering for all types of insulation work at the beginning of the current scheme in 2005. These were taken as a benchmarking guide to harmonise material and labour costs by region. So whichever installer is appointed, the price is the same. Thus the state made possible for customers to make their dwelling more energy-efficient paying a reasonable price for quality services.

The fact of the price boost on the fuel markets is indisputable. But example of the fuel poverty in UK convinces me that we should look for a key to solve this issue through technology and responsible consumption. High taxes only provoke utilities companies to enlarge their assets and markets. On the contrary, non-tax measures which stimulate companies, government and consumers to improve their dwellings, to install energy-saving equipment and smart meters, can work better and help in our struggle against environmental pollution and skyrocketing bills. Probably one day, when we stop keeping switched on electric heaters in draughty houses, the energy problem of Europe will finally loose its’ political color, and the right to have lighting and heating shall become a common one.

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