U.K. 'fuel poverty'

David Knott
London
[email protected]

On May 24, the U.K. became the first country to offer all gas and electricity customers-industrial, commercial, and residential-a choice of suppliers.

The government claims that residential gas customers who have changed suppliers have saved an average £78/year ($125/year) on their gas bill since competition was introduced, while the overall gas market has saved £1 billion/year ($1.6 billion/year).

Centrica plc, spawned from former monopoly British Gas plc during privatization, saw liberalization of the electricity market as an opportunity and now provides electricity to about 1.5 million households.

U.K. Energy Minister John Battle proudly flagged the completion of the revolution: "Customers will now set the agenda for energy supply to their homes. And the evidence is that customers intend to do just that, with millions of people having changed electricity or gas supplier already."

Social cost

Gas and electricity market liberalization shows just how far the government has changed the U.K. from a state-controlled economy to a free-market economy.

While this has been a great triumph in reducing monetary costs to customers, there has been a social cost. The new business-like suppliers cut off supplies to customers who cannot pay their bills.

This has meant that many of the U.K.'s poor people-a growing proportion of the population despite the ever-increasing affluence of Britain as a whole-have been denied heating for their homes. Many have died as a result.

The U.K.'s 26 million gas and electricity customers include about 19 million households, of which 4 million are said by industry regulator Callum McCarthy, director general of electricity and gas supply, to suffer "fuel poverty."

McCarthy said, "It is a particular problem with pensioners, who make up more than half the fuel-poor, and for single-parent families. It results in discomfort and ill health. It is associated with poor housing and low incomes. It is a problem to which nobody should be indifferent."

Campaign

Help the Aged, a London-based charity, reckons that more than 20,000 old people die of cold-related illnesses each year in the U.K.

The group defines fuel poverty as the condition in which a household needs to spend 10% or more of its income on keeping warm and says that one in three old people spend more than 20% of their pensions on heating.

So Help the Aged and Centrica formed an alliance to reduce fuel poverty by providing: home insulation to old people; funding to heat old peoples' meeting places; a free advice telephone service; and financial help.

Battle called for gas and electricity suppliers to exercise ethical judgment along with commercial savvy: "It is unacceptable in a supposedly modern and civilized society that millions of households cannot afford to pay for adequate heat and light.

"A visible ethical stance is the new marketing imperative. I am not just appealing to companies' better nature. When energy companies get involved in the community-by helping those who struggle to manage-they reap their reward in terms of reputation as well as better debt management and improved cash flow."