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   Web Issue 3503 July 4 2009   
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Power to the poor

One does not need to be a long range weather forecaster to predict that many Scots are in for a long hard winter. When leaders of Britain's six big energy suppliers appeared before the Business and Enterprise parliamentary select committee yesterday, they warned that further big increases in gas and electricity prices are both imminent and inevitable. One even acknowledged that rises could reach 40%, costing the average household an extra £400. That is on top of the 15% imposed earlier this year.

Along with food and petrol, domestic fuel prices are driving rising inflation and reversing the progress made on tackling fuel poverty. Labour has a manifesto commitment to eradicate fuel poverty for vulnerable households by 2010. But according to campaigners, those spending at least 10% of their income on keeping warm (the official definition of fuel poverty) have doubled from two million in 2003 and could treble by Christmas. That would amount to a quarter of all households. (According to Age Concern Scotland, 1000 Scots move into fuel poverty every time power bills rise by 1%.) So, regardless of all the good work done on insulating cold homes and installing free central heating systems, we would be back to square one, with many thousands once again choosing between eating and heating.

For years, customers have been told to shop around for energy. But recent evidence suggested a third of "switchers" end up paying more and when five of the big six raised their prices in quick succession in January, customers did not know where to turn. This prompted an inquiry into the market by the energy regulator, Ofgem. Perhaps the time has come to refer the whole industry to the Competition Commission. Ten years ago 20 companies were fighting for market share. Now prices move up and up in unison. This may have more to do with inertia than collusion but it is not healthy.

Secondly, as the Scottish Council Foundation suggested yesterday, power companies should be demonstrating more corporate responsibility. Paul Golby of Eon UK recently asked why he should help the poor when nobody asked the same of Tesco. Poor example, Dr Golby. Supermarkets for all their shortcomings, effectively do just that through their own brand budget ranges. By contrast, power companies effectively charge many of their poorest customers on pre-payment meters the highest tariffs, while the rich save by using direct debits and capped deals. The government's plan to share data with suppliers on which households to target for social tariffs is a step in the right direction but why not force suppliers to devote some of the £9bn they have received from the EU in carbon credits to helping the fuel poor? Alternatively, the government could recycle some of the extra VAT from higher energy bills to subsidise the poorest. When the going gets tough, it is incumbent on the governments of rich nations like Britain to cushion the impact on the most vulnerable.


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