New Deal needed to combat energy poverty
As I write this, an elderly person is deciding whether they can afford to heat their home, a parent is choosing a warm meal over a cold bath for their child, and a household wonders if it can pay its bills – this is unacceptable.
In 2016, the decisions listed above are ones that millions are making throughout Europe. Currently over 50 million EU citizens are living in energy poverty.
Energy poverty is a hidden epidemic. In my region, the North West of England, over 200,000 people are living in energy poverty. Many believe they are just not earning enough money to pay their bills – but this is not true. Evidence shows that energy poverty predominantly affects those in work (often in two jobs), single parent households and the most vulnerable. That is why I firmly believe that access to energy is a social right – just like food, water, shelter, education and security.
Frustratingly, the behaviour of energy companies and suppliers is only making the situation worse. The energy market is highly concentrated and power lies in the hands of too few suppliers. This leads to a situation where energy suppliers are paying less for wholesale energy (the price ‘they’ pay) and failing to pass on savings onto consumers – making record profits in the process.
Why is this happening? From a consumer perspective, energy companies are leaving many households on ‘sleeping contracts’. These are energy contracts that customers signed many years ago and usually require large termination fees to leave. Imagine paying for dialup internet when you can buy broadband for half the price and twice the speed. That is a ‘sleeping contract’ and many do not know they are overpaying.
Furthermore, overcomplicated bills are not helping the situation. This is not to say that consumers cannot understand bills, but rather, they contain information that is not relevant. When you receive a bill it is impossible to know whether you are paying too much for energy. We only receive our own bill – what do you compare it against? Even if you swap bills with your neighbour, they probably have different consumption habits.
Alongside sleeping contracts and confusing bills, many households are incredibly energy inefficient. Those who live in energy inefficient homes pay more for energy because windows and walls fail to retain energy. Those with the money and the time can make investments to lower their bills – whilst those living without the funds or in private rented accommodation are left to pay higher bills.
So the situation is this: more people are living in energy poverty; energy companies are making record profits; households are being kept on expensive and outdated energy contracts; consumers are not getting the right information to switch suppliers; and inadequate and energy inefficient accommodation means the poorest people are paying more for energy.
Although energy poverty is a multi-layered problem with many different players – the solution is simple. Included in a Labour report I authored, ‘A New Deal for Energy Consumers’, we have presented clear recommendations to fix our broken energy market. ‘New Deal’ calls for the end of termination fees when switching to cheaper suppliers, simplified energy bills and guidelines to ensure suppliers notify customers when cheaper tariffs exist.
At its essence we want affordable energy to be considered a basic social right and prevent the door-step selling of energy contracts – we must endeavour to protect our most vulnerable energy consumers throughout EU energy legislation. Finally, we want energy regulators to work with energy suppliers and price comparison organisations to tell you if you are on a sleeping contract.
I want to make this clear – nobody in 2016 should have to choose between cooking a warm meal, turning on their air-conditioning or heating their home. This report is a prime example of 28 countries coming together to challenge the practices of large multinational energy companies. In the context of the EU referendum, leaving the EU would undoubtedly make it harder for the UK to challenge the behaviour of energy suppliers whilst protecting consumers. That is why we need a new for energy consumers.