Fuel Poverty & The 'State' of the Nation

Over the past few weeks 'Fuel Poverty' has been in the news; primarily how to tackle it in the face of rising energy bills and the profit being announced by the big energy companies.

Most households will have seen their energy bills triple in the space of 6 years, which has made it harder to budget household bills, but what about those people who are already on low incomes and already struggle to heat and light their homes?

For anyone who is on a Pre-Payment meter it must now seem like the basic requirements of heat and light that we all take for granted - are being priced out of reach.

Anyone can be on a Pre-Pay meter, here are just some examples:

• Renting property
• On low income
• elderly
• seen as bad risk
• never got round to changing
• like to pay over the counter

The truth is whatever your circumstances - if you are using a Pre-Payment meter you are being penalised against, for paying in advance.

It's crazy when you think about it - we all hear about the discounts for paying on a Direct Debit, as the company concerned is going to get paid on a certain date, but if you pay up-front your paying through the nose.

This weeks budget has announced proposals to help, but it does have some worrying loose ends; specifically where the energy providers will get the money from to help people suffering fuel poverty.

Pre-Payment tariffs are odd in their nature, in that you have to pay up front for the energy you will use. This gives the energy companies the guarantee that their fuel will be paid for but why does it have to cost more than a 'Standard' tariff?

Lets take Mr Jones as an example:

Mr Jones lives in a house in the North West of England, has a Pre-Payment meter, and spends £400 on Electricity and £450 on Gas over the year.

This would buy him 12,202 kWh of Gas and 2959 kWh of Electricity with the local suppliers.

Mr Jones could save £58 per year, just by changing the payment method to Cash/Quarterly. If he changes his supplier, he will make a further saving of £256. Imagine what difference that would make to anyone - especially a low income household.

Same fuels. Same requirements. It is hoped that the extra money will be found from the profit these companies are already making, and not by charging extra to other customers who are already struggling.

Currently the easiest way to reduce your energy bills is to either change your payment method and/or change your energy provider.

Figures Used:
British Gas used as the current supplier for both fuels.
£450 = 11,370 kWh per annum on Gas, £400 = 2,996 kWh per annum on Electric.
Changing the payment method to cash, staying with British Gas saves £67.
Best saving by changing suppliers and payment method would be £279.

Powergen used as the current supplier for both fuels.
£450 = 13,034 kWh per annum on Gas, £400 = 2,922 kWh per annum on Electric.
Changing the payment method to cash, staying with Powergen saves £50.
Best saving by changing suppliers and payment method would be £234.

Figures correct as of 11/03/2008.