New energy price cap will hit lower income households hardest
By: News Archive
As Ofgem announced the revised UK energy price cap today, UEA's Dr David Deller says that energy affordability difficulties could reach a level last seen in the late 1980s.
Dr Deller, a senior research associate at the Centre for Competition Policy (CCP), said: “A large rise in the energy price cap is likely to have a significant impact on the affordability of energy for many households, particularly those on low incomes. Research by the Centre for Competition Policy shows that lower income households spend a considerably higher proportion of their total expenditure on energy than households further up the income distribution.
“This means energy bills are far more prominent to them and, more importantly, they are more likely to face difficult choices regarding whether to reduce their energy consumption or cut back on other spending.
“In the long-run perspective, it seems likely that energy affordability difficulties will reach a level last seen around 2013 or possibly in the late 1980s."
He added: “The challenge for government and Ofgem is that these increases in bills are being driven by an increase in underlying costs due to the high gas price. Ultimately, this increase in costs has to be paid for by someone.
“The main choices are therefore around the extent to which: (i) the costs are spread over a longer time period, or (ii) higher income households provide funds, via general taxation or their energy bills, to limit the bill increases of lower income households.”
Dr Deller’s research has focused on consumer behaviour and policy questions related to regulated markets, in particular the energy and water sectors. He has investigated consumer switching behaviour in the UK energy market and the measurement of fuel poverty.
Dr Deller recently wrote about energy affordability for the CCP blog.
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