This year, a quarter of all households in England and Wales have fallen into fuel povertyÂ thanks to a high increase in energy bills this autumn. According to a report by Consumer Focus,Â there are just under 7m households in Britain living in fuel poverty, the highest figure on record. Apparently, four out of 10 people are worried they will not be able to afford their next energy bill,Â which I’m sure youâ€™ll agree is quite shocking.
The Government considers anyone to be living in fuel poverty if you spend more than 10% of your household income on fuel in order to live comfortably.Â There are three main factors which determine whether a household is considered to be in fuel poverty or not, which are the cost of energy, the energy efficiency of the property, and the household income.
So where is all the money going?
Â It doesn’t matter which energy supplier you’re paying ifÂ you don’t know what you’re paying for. According to energy industry watchdogÂ Ofgem, only Â£495 (or 43%) of the average dual fuel bill goes towards the wholesale cost of your gas and electricity.
An extra Â£657 per customer per year is added onto each bill, which includes:
- Â£230 in network costs (including distribution),
- Â£127 in operating costs (including billing and customer service staff),
- Â£92 for the government’s environmental and social schemes (such as Cert)
- Â£58 in VAT
- Â£58 to cover any other costs, such as metering.
- This leaves a net margin of Â£92.
The coalition has said they want to end fuel poverty by 2016, however, in the mean time people don’t want to freeze. Â Channel 4 News revealed, there are still more people in fuel poverty than ever. So it seems to be up to the consumer groups to fight for fairer energy prices.
Four of the main 6 energy companies have recently declared that they will be cutting their prices, but unfortunately the reductions will not take effect until March, leaving many to remain in fuel poverty until early spring. Nice gesture, but is it really enough?
And Now for the good news !- The BIG SWITCH.
It is easy to understand the drive to put pressure on the energy companies to produce cheaper tariffs, some would argue that it is essential we do so. Consumer group Which? has teamed up with 38 Degrees, an independent community of UK citizens who campaign for social issues. Together, they are launching a campaign called ‘The Big Switch’, where they will negotiate with energy suppliers in order to try and secure a cheaper energy deal by holding a â€˜reverse auctionâ€™, where energy companies are invited to put forward their lowest price per kilowatt of electricity and cubic meter of gas.
Anyone living in England Scotland and Wales can sign up by going to http://www.38degrees.org.uk/page/s/the-big-switch#petition
The winning deal will then be offered to everyone who signed up and Which? will then handle the switching process. Once a deal as been made you can always decide if you actually want to accept it, but in the meantime its worth signing up as every name increases the bargaining power available.
Executive director of Which?, Richard Lloyd said: “The government, regulator and energy companies have failed to move quickly enough to improve things for consumers when so many are struggling to pay their bills. That’s why we decided to launch The Big Switch. This is a completely new way to buy energy as a group. The bigger the group, the stronger our bargaining power will be.â€
This really is a very exciting way for communities, in this case those across the UK to work together to bring down prices of the basic resources such as gas and electricity that we use everyday.
It is conceivable that due to these concerns, the government sent out 675,000 letters last week to households across the country in a bid to raise awareness of the Warm Front scheme. And there are other steps being taken by the government to deal with fuel poverty in the future, including the introduction of theÂ Green Deal, which aims to get more houses insulated, although some of these plans have also faced criticism. Consumer Focus Â toldÂ Channel 4 NewsÂ that plans to replace three existing initiatives ending in 2012 and 2013 with the new energy company obligationÂ effectively represent a funding cut. But the government says it represents Â£1.3bn of investment annually.
David Babbs, executive director of 38 Degrees, said: “We are all sick of gas and electricity companies ripping us off. If thousands of customers band together we will have the bargaining power to do something about it. The big energy companies act like they are untouchable, but this people-powered campaign can turn the tables and bring down prices for everyone.”
The energy and climate change secretary Edward Davey said he was “delighted” with the scheme: “I have long believed collective purchasing will be a game-changer in terms of handing power back to consumers. I want to make it easier for consumers to club together and use collective purchasing power to reduce their gas and electricity bills. We are looking hard at how we can do this and how we can remove barriers to enable more initiatives like The Big Switch. At the same time we are working with Ofgem to simplify energy tariffs, make energy bills easier to understand, and boost competition in the market so that consumers can get the best deals.”
So take a look and sign up now, it only takes a few seconds.