Energy price rises "will push another 1.6m pensioners into fuel poverty"

19/06/2008

News that senior energy industry insiders are predicting further price rises of up to 40% this year will be a blow to cash strapped Brits, says uSwitch.com. It would mean the average household energy bill hitting a crippling £1,467 this winter – average bills were £912 in January 2008, so in total, consumers are looking at a 61% or £555 increase in household energy bills in a year.
 
Britain's biggest older people's organisation, the National Pensioners Convention (NPC), has claimed that the threat that energy bills may rise later in the year by 40% on top of the recent rises, will push another 1.6m older people into fuel poverty.
 
Dot Gibson, NPC vice president said: "This announcement will have a devastating effect on those older people already struggling to pay their energy bills and is likely to drag well over a million more into financial hardship.

"Around 2.4m pensioner households are currently spending more than 10% of their income on fuel bills, and a 40% increase in energy bills will mean that millions of older people will be facing even higher bills than before and having to make the unenviable choice between whether they can eat or heat.
 
"For every 1% increase in bills, a further 40,000 older people fall into fuel poverty and every year, well over 20,000 die from the cold. A 40% increase will therefore mean 1.6m older people falling into fuel poverty. It's time the government intervened to prevent the energy companies making profits at the expense of vulnerable pensioners, raised the winter fuel allowance to £400 and regulated social tariffs to give proper discounts to older customers."

Bad news on the fuel front has been gathering pace in recent months and even more alarming is the fact that the spike in energy prices does not look like a temporary situation and consumers will have to adjust to paying far more for their gas and electricity.

According to the Bank of England, wholesale gas prices have increased by 160% in the year to May. But unfortunately suppliers haven’t caught up with the increase in prices – as they have yet to pass these on to consumers – and any respite from a downward trend in prices as demand drops during the summer months has, as yet, failed to materialise.
 
Even if bills hit £1,467 by the end of 2008, consumers may not be over the worst. If current wholesale gas trading prices continue at £1 per therm, this could translate into a further 10% to 15% going onto household energy bills in the first half of 2009.
 
Of most concern is the fact that BERR (the Department for Business, Enterprise and Regulatory Reform) has felt the need to reflect current trends by introducing a new modelling scenario called ‘High High’ when looking at the future of wholesale gas prices. In the ‘High High’ scenario the average wholesale price is 67 pence per therm for 2010, increasing to 92 pence per therm in 2015. The fact that such a situation is considered feasible enough to warrant BERR building a scenario around it is enough to set warning bells ringing.
 
The UK also has a lack of storage capacity, which means it has to turn to Europe when demand for energy exceeds available supply, leaving it vulnerable. Year ahead wholesale gas prices in the UK are 16% higher than in Europe and consumers in this country have seen price rises this year outstrip those made in the continent.
 
Ann Robinson, Director of Consumer Policy at uSwitch.com, says: “The days of cheap energy are over. Households could see the largest ever increase in household energy bills this year. If suppliers do increase bills by a further 40% by this winter then consumers will have seen a 61% or £555 increase in household energy bills in a year. If average energy bills do hit £1,467 by the end of 2008, spending on energy will account for 5% of the average household’s net income.
 
“This is going to cause huge financial pressure and consumers will naturally expect their salaries to increase to help them meet the spiralling costs of living and working in Britain. The Government knows that this will simply exacerbate the situation, but it will have one hell of a battle on its hands trying to dampen down wage expectations. The outlook is grim.
 
“Consumers cannot afford to ignore this - they need to take action now to stand any chance of limiting the impact of higher prices. Online energy plans remain a good option for those who want to pay a lower price now and are happy to take their chances on the market in the future.

"However fixed or capped price plans could be a lifeline for those who are more vulnerable to price rises. These plans carry a premium, but if you’ve never switched before you will probably still save money immediately by moving to one. However, the best fixed and capped deals are disappearing fast so consumers need to act quickly.”
 
For more information on the best deals currently available, visit the website linked below or call 0800 093 06 07.

FUEL POVERTY - THE FACTS

•    Nearly 90 per cent of all excess winter deaths are of people over the age of 65.  There were 22,300 excess winter deaths of older people last year, and 260,000 since 1997.

•    Almost one in three older people live in homes with inadequate heating or insulation making their homes more difficult to heat and/or keep warm.

•    More than 1 in 4 people living in fuel poverty are over 70 years old
Average annual energy bills now exceed £1,000. This will absorb 16 per cent of the income of a single pensioner dependent on the pension credit minimum guarantee and the current £250 Winter Fuel Payment.