Keep on crossing borders

Or why billion pounds invested to energy services may fly out through the breaches

(Print version in the Spring 2008 issue of “Ecosprinter“)

All we are in Europe use to live under the everyday pressure of publicity: mobile operators offer new tariffs, discounts on trendy phones or presents for loyal clients. It seems no is a time for energy distributors. We used to think that light and heat in our houses is an essential part of everybody’s live, is a good everybody has a right to have wherever he or she lives. Probably you are still thinking that light and heat, as well as potable water, should be available in everybody’s house, whatever the level of incomes of a consumer. But have you ever think buying bottled water that this product has nothing to do with a right of common potable water access. No we are starting to consume perfectly packed and attractively designed heat and electricity packages. Have you receive a call from someone offering you to choose your electricity provider o tariff plan? But tell the truth, have you ever paid less after changing your mobile provider?

Energy markets liberalization, the process constantly going during the last decades in all European countries, had to bring to final consumers better prices and services. In fact, new oligopolies operated by a few energy providers have appeared again. As a rule those companies don’t own any energy sources (gas, oil, coal), but having infrastructure giving the access to a final consumer, can manipulate the prices we pay. At the same time, fuels producers from abroad, which could provide lower prices, can’t enter to the local European markets. Taking in account where Europe get the energy from, sounds clear why this regulation has so strong political implication.

Due to the growth on the world energy markets, we have the situation when households find more difficult every time to pay their bills. Imagine, in the UK, one of the richest counties in the world, more then 10% of the population (or 4.5M families) can’t allow sufficient heating during the winter. It’s precisely where in 2001 a new term, fuel poverty, has appearedⁱ. Is said to occur when a household needs to spend more than 10% of its income on fuel use in order to heat the home to an adequate standard of warmth. It’s understood why the elders, the youth and other socially unprotected groups are the first to become “fuely poor”.

May be this term is not very suitable, specially taking in account the fact, that there are millions and millions of people in the world who have neither access to electricity nor to commercial fuel sources for heating and cooking. Around a thousand people were killed this winter in Afghanistan during the abnormally cold winter. It’s an example of the fuel poverty of completely other sort. Anyway, even in richer Europe poor men becoming poorer again.

The part of expenditure poor people spends in UK on energy and utilities allowance is almost 4 times higher then those of the richest (see Fig.1). Even though, Russians by this characteristic are poorer then fuel poor Brits. Doesn’t matter that Russia is richer with natural fuels, just the incomes of people over there are lower. On the other hand, even in well-being Sweden and Canada households use to spend more on energy.

Eurostat gives comparable data on this issue only for 1999. Even so, it’s obvious that in UK households used to spend less than in 2006 and less then in almost all EU countries (see Fig. 2). On the other hand, 20% of families with the lowest income used two spend on light and heating the share two times bigger then the 20% of those had highest income. It was the biggest gap in all Europe. For comparison, in Sweden this gap was very narrow.

Many British houses use prepayment meters, which let companies avoid user’s debt. You buy a magnet card in any store (for instance, for 5 or 25 pounds) and insert it into the meter. From that moment you may use electricity only within available limit. Looks like being using a handy, isn’t? The criticism against PPM consisted in fact that one paying for card pays for its manufacturing, distribution, retailer’s interests and so on. The meter operation is neither cheap. But this purely English system is not going to disappear in brief: there are millions of unregulated migrants in country who just can’t legally have a bank account. The regulators have advised suppliers to install “smart meters”. These meters, which would mean an end to estimated bills, send more accurate information about energy consumption directly to the supplier, in real time. With these meters supplier can finish and start again energy providing remotely.

But the main issue concerned a taxation of windfall incomes, which companies get when oil prices strikes the ceiling or when making a good deal on CO2 emissions market. The government affirms that “the big six utilities” (Eon, EDF, Centrica, RWE, Npower, Scottish and Southern, Scottish Power) spends only a 0.1% of its GBP billion annual turnover helping vulnerable customers, when the new windfall tax could give more benefits for them. Utilities have appealed that this tax will impede new stations construction and provoke energy deficit on the growing market. It seems to be very bizarre polemics for country which aims energy-efficient economy, in simple words, one consuming les kW and emitting less CO2.

But the most interesting fact is that FOE (Friends of the Earth), one of the most affluent European environmental organizations, have backed this very contradictive idea, and proposed even more contradictive measures to strike energy poverty. Between others: send windfall tax gains to decrease income tax for individuals, budget to households 50% of insulation works they can apply, cancel car purchase tax on new cars to accelerate the shift to buying low carbon vehicles. It’s clear from the first view that these initiatives make a vast field for corruption or improper budget spending.

On the contrary, most utilities position looks at least more constructive and realistic. The Mail have published a very typical story of 80 years old Harry Pointer, who’ve been living without central heating and fall in 1500 pounds debt using his electric heater. The provider has decided to insulate his house and install energy-saving equipment on its account to make a chance to get out of the debt paying less monthly. EON, for example, announced that it was offering anyone over 70 free insulation and energy-saving equipment, such as low-energy light bulbs. Npower advisers work with customers to set up a payment plan they can afford and free loft and cavity insulation are available.

The Warm Front, a scheme designed by The Department for Environment, Food and Rural Affairs (DEFRA) and trialled in one of the British counties is another opinion of productive government-business cooperation. Warm Front obtained competitive quotes through European tendering for all types of [insulation] work at the beginning of the current scheme in 2005. These were taken as a benchmarking guide to harmonise material and labour costs by region. So whichever installer is appointed, the price is the same. Thus the state made possible for customers to make their dwelling more energy-efficient paying a reasonable price for quality services.

The fact of the price boost on the fuel markets is indisputable. But example of the fuel poverty in UK convinces me that we should look for a key to solve this issue in the field of technology and responsible consumption. High taxes only provoke utilities companies to enlarge their assets and markets. On the contrary, non-tax measures which stimulate companies, government and consumers to improve their dwellings, to install energy-saving equipment and smart meters, can work better and in our struggle against environment pollution and skyrocketing bills. Probably one day when we stop keeping switched on electric heaters in the draught houses, energetic problem of Europe will finally loose their political color, and the right to have a light and heat will finally became a common.

Sources I used in this article, and when you can find more information on fuel poverty:

1. http://www.berr.gov.uk/energy/fuel-poverty/index.html

2. Npower admits laws needed on fuel poverty / 9.03.2008/ The Observer

3. Budget report 2008: Fuel: Help with bills/ 13.03.2008/ The Guardian

4. UK budget avoids drastic action to curb fuel poverty/ 12.03.2008/ Platts Commodity News

5. You only have to ask for help say power giants / 9.03.2008/ The Mail on Sunday

6. Ed Crooks and George Parker/ 4.03.2008/ Financial Times (FT.Com)

7. ‘Immoral’ meters mean the poor pay more/ 25.03.2008/ The Times

8. Scheme has warmed thousands of homes/ 21.02.2008/ North Devon Journal