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Your Money > Household Bills Articles > Energy help: Too little, too late
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By Richard Evans
Despite Gordon Brown's £1bn pledge this morning, anxious householders wondering how to pay for heating their homes this winter shouldn't think their troubles are over. With experts describing the government's energy relief package, which amounts to just £30 a year per household as lukewarm, and energy bills tipped to rise again in the New Year (reaching an average of £1400 per year by 2010) the situation is likely to get worse for most of us before it gets better. If you're a consumer, your best bet is to look not to the government, but to the internet for help. Under the plan energy companies, having announced record dividends last week, will put £910m into existing programmes that allow pensioners and others on low incomes to have their homes insulated free of charge - and everyone else at half the price. The government claims it could save households up to £300 a year. The problem, experts say, is the installation will take many months, which means consumers could be left out in the cold. £300 also happens to be the same figure as the next predicted price hike, meaning households will ultimately not save a penny. It's a good thing then that the state is tripling subsidies from £8.50 to £25 per week if temperatures fall below zero for seven consecutive days. The catch? Only pensioners, the disabled and unemployed households with children under five are eligible. Luke-warm or red-hot - what do you think? Commentators are unimpressed with the proposals, and all the more so given that consumers who rent their properties may find their insulation discounts difficult to claim. Five millions homes out in the cold "The £910m to help 10m households over three years amounts to a meagre £30 per home," says Mark Todd of Energyhelpline, the price comparison service. "Prices could go up by between 10 and 20 per cent in the new year as wholesale gas prices remain at record levels. "[But] this winter over 5 million people will suffer from fuel poverty. They need help now." Energywatch, the consumer watchdog created (and soon to be abolished) by the government is particularly critical of the plans. "The Government has done little to bring immediate and much needed relief to consumers who will not afford the cost of keeping warm this winter," says chief executive Allan Asher. "Frankly, to talk of action to help consumers keep warm this winter as a 'one-off gesture' or a 'token' reveals the paucity of thinking that has been applied to the problem." While the Government has also said that certain special tariffs for vulnerable customers would be frozen this winter advisers, including Todd, say this is merely reiterating earlier measures. Misleading "The freeze on energy bills for those on social tariffs is not new - most energy companies announced this when they raised their prices, following pressure from Ofgem, the regulator. The fact that the Government is announcing this as part of its new plans is misleading." "[The government should] deal with the obscenity of some prepayment meter charges being 60% higher than the same company's online tariffs," Asher adds. "It could mandate social tariffs, especially as there's growing speculation that some suppliers may be about to ditch them." He is unconvinced by the energy saving measures, because up until now they have been funded by consumers anyway. "Improved energy efficiency is the long term solution to fuel poverty, but any new Government measures to increase the amount of funding for efficiency programmes must come with the cast iron assurance that it will not be added to consumers' bills. "Currently, the [Carbon Emissions Reduction Target] scheme is entirely funded by consumers, not Government nor industry. As it stands the scheme has inequality hard-wired into it: a single pensioner on pension credit receiving £124.05 per week will contribute the same amount as an energy company Chief Executive on a £1,000,000 salary." Todd argues that the earmarked funds would be better spent on rebates: "The government should extend the winter fuel allowance to help the UK's poorest people stay warm. If it gave £200 to the bottom quarter of households who do not currently quality for this allowance, it would cost £1 billion; just over the amount outlined in [today's] plans." Online tariffs could be the answer So what does government have to say about all the criticism? Go green. "In a world where prices are likely to remain high, it's time for all of us to get more energy efficient," says Business Secretary, John Hutton. "Thanks to Government and energy companies working closely together - an extra £1 billion will be available to spend on measures that will bring a lifetime of savings." Unconvinced? Scott Byrom from moneysupermarket.com says consumers must take matters into their own hands before the cold really sets in. "The key question about this scheme is: when will it deliver? Although you can claim your free or cut-price insulation right away, we think it will take a long time for the scheme to be implemented and that instead consumers should act quickly to get the best tariff and start cutting down on their use of energy. "Switching to online tariffs and payment by direct debit can save hundreds of pounds a year." In the meantime most observers, including Asher, urge the government to raise its game before it's too late. "Government has travelled some way to develop a decent fuel poverty strategy. But there's an awful long way to go, and it needs to get there quickly."
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