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Energy firms cash in on fuel poverty

As winter looms, many millions of people in Britain are preparing for a winter of shivering cold in badly insulated homes that they can’t afford to heat. And the poorer people are, the more likely they are to be penalised in terms of fuel costs and insulation. Four million UK households live in fuel poverty, says Energywatch, and pre-pay meters are a major contributing factor.

A report from Energywatch shows that customers using pre-pay meters are paying far more for their energy than other customers. More than three million people, normally those on low incomes, pay for their energy in this way. This method of payment is often pushed on people if they have had trouble paying their bills in the past, or have a poor credit record.

A league table published by the National Housing Federation shows that Npower is the worst offender, charging up to £110 per year more to its pre-pay meter customers than to standard credit customers who pay by cheque. The three next worst are Powergen, British Gas and SSE. Massive price rises since 2003 mean that average domestic gas bills have increased by 94% and average electricity bills by 60%. Taken together, these increases mean the average household energy bill broke through the £1,000 barrier in 2006. In 2003 the average was £572.

Another key factor in fuel poverty is badly-insulated homes. But National Energy Action (NEA) the campaign for warmer homes, says the amount the government gives in grant to improve energy efficiency, at £2,700 per household, falls far short of today’s cost for doing the work. Unless people have money to top up the grant, their houses remain uninsulated. But if they had money they wouldn’t qualify for a grant in the first place! An NEA report shows that 75% of households who struggle to afford heating, also live in the worst-insulated houses. Winter deaths amongst the old is higher in the UK than for countries with similar climates and living standards and a key factor affecting this is the poor standard of insulation.

And at the other end of the age range, Barnardo's assistant director of policy, Neera Sharma says: "3.8 million children in the UK are growing up in poverty and many of those are living in fuel poverty. It is morally outrageous that in the fifth richest country in the world parents have to decide between 'eating' or 'heating'.”

Npower’s German parent company RWE made £1.68bn profit last year. All the energy companies will rake in profits this winter while elderly people die before their time and children go off shivering to school. Bringing energy generation and distribution into co-ownership is an urgent environmental and human rights question. Local democratically-run energy boards could then develop plans that use the most locally-appropriate and environmentally-friendly methods to deliver cheap warmth to all homes, alongside a comprehensive insulation programme.

Penny Cole
AWTW environment editor
2 November 2007

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