Energy is an integral part of our everyday lives. We use it in almost every aspect of our day and is an essential component in the development of our economy and quality of life. For those who don’t have energy readily available to them, however, life isn’t quite as simple. There are proven links between fuel poverty and education, fuel poverty and health issues and fuel poverty and household sanitation and comfort.
It is true that fuel poverty is an issue that mainly concerns those living in developing countries; however, it is still something that we need to address here in Europe, too. It is difficult to acquire the precise figures, but, according to French specialists, RAPPEL, anywhere between 50-125 million people are currently living in fuel poverty across Europe.
In a bid to improve this situation, initiatives have been launched in varying degrees across Europe to try and reduce the amount of people suffering from fuel poverty. Due to the differing approaches adopted by each country, this document aims to give a comparison of the solutions offered through a selection of these nations. In addition, to gain a broader perspective on the issue, we have also added non-european nations, Turkey and Japan, to the study.
What is “Fuel poverty”?
At present, there are just four countries within the European Union that have officially defined the term ‘fuel poverty’. These are: the United Kingdom; Ireland; France; and Cyprus, all of which have defined it differently. For those who have not yet officially given the concept a definition, however, the approach is much more generalistic. In Austria, for example, all subcategories that fall under the umbrella of ‘poverty’ are treated equally, stating that all aspects of life, not just energy, are relevant to the improvement of quality of life. On the other side of the spectrum, the UK targets each individual type of poverty, with catered aid that specifically supports those in certain domains of need.
According to Government regulator, OFGEM, there are three key pillars on which we define the term ‘fuel poverty’. These are: household income; household energy requirements; and fuel prices. In the UK, we generally categorise people to be fuel poor if they spend more than 10% of their household income to fulfill their energy requirements. Although this may not be the standardised definition across the continent, we can still assess the available options, in terms of support and assistance, for those who find themselves in difficult financial situations as a result of energy bills.
The diverse European landscape of fuel poverty
It’s difficult to identify exactly just how many people are living in fuel poverty in Great Britain due to the fragmented way in which it is measured. According to the most recent statistics released by the English, Scottish and Welsh governments, roughly 3.3 million people are living in some form of fuel poverty across mainland Britain. Individually, this represents around 10% of England, 30.7% of Scotland and 23% of Wales. Given the average national wage of £27,777, dual fuel energy bills, costing an average of £1,135, represent around 5.1% of earnings.
Unlike many other European countries, social tariffs don’t exist, strictly speaking; however, aid is provided in other capacities such as seasonal monetary discounts and debt clearance schemes. These are targeted at those that have officially recognised financial difficulties and special personal circumstances.
Plans for the future
Following the recent snap election, Theresa May has pledged to place a cap on standard variable tariffs, seeing most benefit by up to £100, which is part of her plan to ‘support working families’. However, as of yet, there has not been any specific mention of a course on which the nation will tackle fuel poverty.
Cold Weather Payment
Temporal assistance is provided by the Government in times of great cold for those who have difficulties paying for their heating. The terms of applicability for this scheme start with the average temperature in your area being recorded as, or forecast as, below or less than zero degrees celsius for 7 consecutive days. Should you meet all other criteria, you will receive £25 for each seven day period.
Warm Home Discount
Another one of the Government’s temporal aid schemes is the ‘Warm Home Discount’, which provides a discount-based payment to help with costs related to heating through the winter period. A similar eligibility criteria is required to that of the ‘Cold Weather Payment’.
According to the 2016 report from the ONPE - the French National Observatory for Energy Poverty - more than 8% of French people, amounting to around 12 million, have serious difficulties in paying their gas and electricity bills. The average national energy bill in France amounts to around €1,600 (£1,430), which is 26% higher than in the UK.
Special tariffs exist in France for those who meet the requirements for a reduction in unit rate. This reduction can amount to up to €185 (£165) per year, depending on the specific household circumstances.
Future plans, 2018: Energy vouchers
In 2018, France plans to phase out social tariffs, to be replaced by ‘energy vouchers’. This is a simple discount-based scheme in which households will be automatically allocated a lump-sum-discount on their energy bills following their tax declaration. Vouchers will be issued based on a variety of household criteria and will be provided up to €227 (£202) per year.
Solidarity Fund For Housing
The ‘Solidarity Fund for Housing’ was set up in each French constituency (département) to provide financial support in the form of loans, grants and guarantees, to those with scarce resources with regards to fulfilling their household financial obligations (bills, rent, etc.). This support is allocated according to the varied criteria of each constituency.
From 1st November to 31st March, energy suppliers are not able to cut a customer’s connection to their electricity, even if they have not paid their bills.
According to the ‘Association of Environmental Sciences’, 11% of Spanish households (around 5 million people) found themselves struggling to maintain their home at a suitable temperature in 2016. Although we have the idea of Spain being a rather desirable climate, winter in some parts of the country are just as harsh as in the UK, if not more so. Temperatures in the north of the country have been recorded as low as -32 degrees celsius. Also, cold isn’t the only issue that faces Spanish households: air conditioning is essential to many households in southern and central regions of the country, where common summer temperatures exceed 40 degrees celsius.
The Bono Social
The bono social is the main preventative measure adopted by vulnerable Spanish households in subsidising their energy bills. A discount amounting to between 25-40% will be taken from the final electricity bill, but does not apply to gas or any other kind of heating fuel.
No connection cuts for the vulnerable
For households in a particular state of vulnerability, of which that are assisted by local government social services, electricity connections are not allowed to be cut ‘under any circumstance’.
In 2015, Portugal had an at-risk-of-poverty rate of 46.1%, before any economic aid. Despite being known for its beauty and lavish tourist retreats, such as the Algarve and Lisbon, Portugal has some of the lowest wages in Europe. Couple this with having the 5th most expensive electricity prices in the continent, it’s perhaps no surprise that portuguese households are struggling to pay their bills.
According to Eurostat data, if you take into account the national average wage, Portugal has the highest energy bills in Europe. On average, around 6% of the average family’s earnings go towards paying energy bills.
Thankfully, Portugal have employed quite extensive discounts in the form of social energy tariffs. These tariffs can result in a discount of up to 33.8% on electricity bills and 31.2% on gas.
At present, only 5% of Portuguese households have access to the social gas tariff. This is partly due to the tiny size of the distribution network, preventing it from reaching a large amount of homes across the country. This means that many residents are forced into buying alternate fuels such as butane and propane. This is much more expensive and, of course, does not come with the social tariff.
According to the EU-SILC (European Union Statistics on Income and Living Conditions), 3% of people (268,000) in Austria are being affected by fuel poverty. In a 2012 Statistik Austria Report, it was reported that the average monthly energy expenditure in the country was around €137 (£122), which represents around 4.7% of all earnings.
The deregulation of the energy market was the first step towards countering the overinflated prices offered by national monopolies. However, more rigid regulatory attempts have been needed to prevent vulnerable customers from having their connections cut by suppliers. The “Grundversorgung”, or primary care in English, gives all customers the right to a prepayment meter in place of their standard direct debit meter should they fault on their bills. This makes payment much more easily manageable and prevents any cumulative debt.
No national financial relief
As of yet, Austria have not yet implemented any kind of state-provided financial aid for families struggling with their energy bills. This is largely due to fuel poverty not having been officially recognised as an independent form of poverty. As such, current solutions are generally provided by aid organisations and private institutions that rarely see any kind of intervention from the local authorities.
Energy poverty affects between 5-20% of Italian households. Like Portugal, many of us in the UK have the idea of Italy being a lavish, fashion paradise and holiday destination; however, Italy has suffered from some of the worst economic setbacks in Europe and currently has a large percentage of its population struggling in all areas of the poverty spectrum.
To alleviate energy poverty, the Government launched a discount tariff in 2009 that was meant to help families to pay for their energy bills. There are currently three kinds of discounts available. These are: for electricity customers with low incomes; for gas customers with low incomes; and for electricity customers with special medical conditions. These 3 discounts can be accumulated.
This discount is directly applied to your energy bill each month as a deduction of 8.33%. This can reach up to €165 (£147.50) per year for electricity and €266 (£238) for gas, depending on individual circumstances. There is no apparent cap on this discount, but the scheme is currently not very well known, which could have potentially freed a significant portion of available funding. Less than half the possible beneficiaries in Italy are currently benefiting from this scheme.
21% of Belgian households are affected by energy poverty. Despite being the home of the European Union, many families across Belgium are struggling with the worldwide price hikes on energy.
Set by the Government, this social rate is a preferential tariff that corresponds with the lowest commercial price on the market. Like most social tariffs, this one also requires customers to meet certain criteria in order to benefit from its reduced rate.
Statute of Protected Customer
Anyone who has accumulated any kind of debt with their gas and/or electricity supplier can request the status of ‘protected customer’ after receiving a notice of default from their supplier. If the statute is granted, the customer’s contract will be temporarily suspended. The customer can then benefit from the preferential ‘social rate’. Once the accumulated debt has been paid off, this protective measure will be removed. The previously suspended contract will then be resumed. If the debt alleviation process takes more than six months, the customer will lose his or her right to the preferential rate. The case will then be passed on to the distribution network, who will then enforce further fees.
Anyone who is having difficulties paying their energy bills can submit a support request to the Public centre for Social Welfare, which will be evaluated based on various eligibility criteria. Successful applicants will receive remedial or preventative support in the form of bill payment.
Uniformly identifying a poverty rate can cause great complications in terms of fuel poverty due to the extremely high income inequality in Turkey. Distinguishing certain regions as the poorest shows us where perhaps the largest amount of fuel poverty exists, such as in Western Marmara and South-Eastern Anatolia. We can also see, for example, that in places like Bursa, Ankara and Kocaeli, low income households are spending in excess of 10% of their earnings on gas alone.
Unlike many of the abovementioned European examples, energy poverty is not comprehensively tackled in Turkey. There are, however, a few regional initiatives to act against it in certain capacities. In certain provinces that have a high poverty rate, a small discount of 0.65% is applied to energy bills in the hope that it will alleviate a part of the region's energy poverty. Another such aid platform is through The Ministry of Energy and Natural Resources, which distributes coal to the households of poor families to assist in heating costs.
13.9% of Japanese people live in fuel poverty. Japan is one of the most advanced countries, technologically, worldwide and is also, perhaps subsequently, one of the highest consumers of electricity.
Social tariffs like within much of Europe don’t exist, strictly speaking; however, tariffs do exist that cater to 3 different levels of consumption. Lower levels of consumption are set at a lower unit rate due to the assumed lower usage of those with lower incomes. This information comes from the explanation for this decision from the Agency for Natural Resources and Energy, Ministry of Economy.
Due to the above, we could perhaps assume that tariff regulators have already acknowledged the existence and potential of fuel poverty; however, there is much controversial discussion as to whether this system is actually effective or not. This rigid categorisation is not always effective and punishes those low income families that are forced into using a lot of energy.
Many believe that the vague definition for fuel poverty needs to be rethought and a restructure is needed of the complex electricity tariffs that are in current circulation.
Public Assistance System
Although social tariffs don’t really exist, there is a method through which families in-need can sought help from the authorities. The Public Assistance System supports households that are having difficulty paying for their energy bills. This support varies throughout each region and is subject to a number of eligibility criteria.