Energy crisis: UK consumers face rising fuel poverty this winter

Colwyn Bay, Wales, United Kingdom – David Peacock is a 70-year-old with disabilities, living on his own in a flat in Llandudno, a Victorian resort town in North Wales, the United Kingdom.

He draws a small state pension, which is topped up with pension credit and a Personal Independent Payment from the UK’s government. In the past year, he has seen his electricity bill nearly double.

David wants energy firms to offer flexibility to customers in tough situations like his.

“Due to mobility and balance issues, combined with arthritic hands and other health issues, I can’t always take a meter reading [when asked],” he told Al Jazeera. “Time will tell how reasonable they will be.”

Wholesale natural gas prices have been skyrocketing as global energy demand roars back with the easing of coronavirus pandemic restrictions and trillions of dollars of stimulus money.

That energy price surge has triggered a wave of failures among UK energy suppliers, affecting nearly two million customers.

But campaigners and experts warn it is also leaving more vulnerable consumers at risk of falling deeper into energy poverty, while hampering the UK’s green energy transition strategy.

Market swings

During the height of business-sapping COVID-19 measures last year, electricity consumption plummeted around the world, along with natural gas prices. In the UK, many smaller energy suppliers used that market swing to attract new customers with lower prices.

But soaring natural gas prices this fall have made that business model unviable because UK energy suppliers can only pass on a portion of wholesale price increases to household customers.

As a result, over a dozen small UK energy suppliers have gone bust since September, sticking millions of customers with the administrative headache of being switched to a new supplier by government regulator the Office of Gas and Electricity Markets (Ofgem).

“Ofgem’s number-one priority is to protect customers. We know this is a worrying time for many people,” a spokesperson told Al Jazeera.

“The energy price cap covers around 15 million households and will ensure that consumers don’t pay more than is absolutely necessary this winter.”

But what is absolutely necessary depends on who you ask, because the cap is regularly adjusted.

The latest one that took effect on October 1 raised the cap by 139 pounds sterling ($191) for customers paying by direct debit, and 153 pounds sterling ($210) for those on prepayment plans.

Millions of people are desperate.

by Ruth London, Fuel Poverty Action

Before that hike, more than four million UK households were living in fuel poverty, unable to afford to keep their homes warm and dry, according to the End Fuel Poverty Coalition, which has warned that nearly half a million households are now at risk of joining them.

Moreover, some customers are totally at the mercy of market forces because the energy caps – despite leaving millions of homes still struggling – only apply to households on a standard variable tariff. The rest have little protection. And those reliant on prepayment meters are particularly vulnerable.

What campaigners want

“Millions of people are desperate, not knowing how they can possibly manage this winter, with the fuel price rise coming on top of an unprecedented cut to welfare payments [Universal Credit], further cuts to public services, rising food prices, COVID, and a health service on its knees in one of the world’s wealthiest countries,” said Ruth London, a spokesperson for campaign group Fuel Poverty Action.

London said the government could take immediate steps, such as extending energy price discounts beyond pensioners to other households in need. She is also advocating for longer-term solutions, such as fully funding emergy programmes to insulate and retrofit UK homes to make them more energy-efficient, and changing the energy price framework, which currently charges “a higher rate to those who have least, and who use the least energy”.

The latest government budget, unveiled by UK finance minister Rishi Sunak on Wednesday, promised to boost public spending, but contained no specific provisions to help households pay for soaring energy bills – an omission that drew sharp criticism from fuel poverty campaigners.

Adam Scorer, chief executive of National Energy Action (NEA), a fuel poverty charity, tweeted: “Chancellor had the extra tax receipts & the targeted mechanisms to deliver support before winter. Chose not to. Cost of living will hit most vulnerable, unabated.”

For people in very worst circumstances on lowest incomes & in the least efficient homes, its a negligent budget.

Chancellor had the extra tax receipts & the targeted mechanisms to deliver support before winter.

Chose not to. Cost of living will hit most vulnerable, unabated. https://t.co/Il4iADxJPn

— Adam Scorer (@adam_scorer) October 27, 2021

 

The NEA has noted that the government’s piggy bank could see an extra 100 million pounds ($137m) netted directly through value-added tax (VAT) receipts on rising energy prices. A further one-billion-pound ($1.4bn) windfall is heading to the UK Treasury thanks to “carbon tax” revenues that have risen steeply due to the natural gas crunch – topping up the four billion pounds ($5.5bn) already made in 2021, putting Sunak in the power seat.

“This gives him the resources to help more than 2.4 million households across the UK who are struggling with the cost of keeping warm,” Scorer told Al Jazeera.

The bonanza for the Treasury would more than pay for Winter Fuel Payments to vulnerable working-age households, providing direct and automatic relief to help with energy bills, the NEA maintains.

“This emergency support will help millions of households get through this winter,” said Scorer. “Without it, they will just sink further into debt, or be forced to turn off the heating, leaving them at acute risk of serious ill health as we get into winter.”

Ofgem’s spokesman told Al Jazeera: “Any customer worried about paying their energy bill should contact their supplier to access the range of support available.”

What on earth do people less fortunate than us feel like?

by Iwan Williams, UK pensioner

Any such support may be in high demand, says Chaitanya Kumar, head of environment and green transition at the New Economics Foundation (NEF).

“There is ever more pressure on households already struggling,” he told Al Jazeera. “With energy bills going up, the Universal Credit cut, National Insurance rises, an end to furlough – and an expected unemployment rise, plus inflation – we’re expecting an extra 2,000 pounds ($2,748) to be added to a family’s annual expenditure from April next year.”

Middle-class squeeze

While it’s an emergency for the country’s poorest, it’s starting to bite the middle classes, too.

Iwan Williams is a pension-collecting retiree living in the family home where he has seen his children grow into adults in the picturesque seaside town of Colwyn Bay, half an hour down the coast from Llandudno. He asked that his real name not be used for this report.

Fearful of future energy price hikes, he said he has just agreed to a deal to fix his dual-fuel (gas and electricity) bills at 315 pounds ($433) a month for the next three years – nearly double his previous average 175-pound ($240) monthly bill.

“And we’re digging into savings to replace a serviceable but very old boiler, in the hope of using less to compensate for the increased prices,” he told Al Jazeera.

Williams also worries about his elderly mother-in-law, watching out for her “doing that pensioner thing” of keeping the house dangerously cold.

“If we feel like this on a household income of around 45,000 pounds [$61,884] with around 100,000 pounds [$137,408] in savings,” he asks, “what on earth do people less fortunate than us feel like?”

Green impact

With COP26, the United Nations’ climate change conference, set to kick off in Glasgow on Sunday, Britain’s approach to energy consumption is in the spotlight. And rising gas prices have already had an impact on the government’s “net-zero” strategy to decarbonise the UK by 2050.

“Part of the net-zero agenda was to make gas more expensive and use that levy to pay for green measures, but that’s been put on hold now,” says NEF’s Kumar. “In the longer term, it should still be full steam ahead for net zero, but if we keep facing these sort of shocks, it’s hard to say.”

The price of gas also has a personal impact on individuals and their communities, said David Peacock in his flat in Llandudno. And the people of the UK are warily eyeing a long, cold winter.

“Like many others, with or without disabilities, these are troubling times,” said Peacock. “And the future has enough physical problems for us all – without the financial uncertainty of whether or not the ever-increasing cost of fuel may impact further on our health.”