Gordon Brown Deal on Fuel for Poor: Companies May Charge Customers

2008 September 11

Today, the Prime Minister of the United Kingdom, Gordon Brown, announced plans to help households with rising fuel costs. Criticised for not imposing a windfall tax on fuel companies, the government instead agreed a £910m package with them. Already the companies are hinting they may pass the cost onto consumers.

Mr Brown urged the energy companies not to pass the costs onto customers. But David Porter, Chief Executive of the Association of Electricity Producers that represents the six largest hinted the energy companies may pass the cost of £1Bn measures onto customers, saying they may not be able to avoid it.

The outline of the plan is this:

  • Encouragement of bill payers to save money by paying by direct debit,
  • Half price insulation for all households regardless of income,
  • Free cavity wall and loft insulation for pensioners and poor households,
  • A freeze on price rises for those on benefits with social tariffs,
  • An extra £16.50 per week for pensioners, the unemployed with children under five, and the disabled if there is a severe winter,
  • A partial reversal to the cut of the Warm Front programme giving free central heating to the poorest pensioners,
  • House to house calls in deprived areas to offer help.

The Prime Minister said “Our objective is nothing less than a sea-change in energy efficiency and consumption, at the same time as helping the most vulnerable households this winter.”

“This is the right approach, giving priority to permanent – not just one-off – changes, with the offer of lasting benefits and fairness for all families, cutting bills permanently every year,”

That the energy companies may pass the cost onto customers is unfortunate given:

  • The 19% increase in dividend payouts to shareholders last year,
  • Meaning a £1.64Bn payout to shareholders in dividends,
  • Research by the Local Government Association found that the big six were “not necessarily” keeping profits to invest in future technology,
  • Business Secretary John Hutton denied the government was being soft, saying they had to be allowed to make a profit to guarantee future investment,
  • Prices have already been raised to consumers:-
  • NPower: Gas up 17.2%, electricity up 12.7% on 4 January,
    NPower: Gas up 26%, electricity up 14% on 29 August,
    EDF Energy: Gas up 12.9%, electricity up 7.9% on 15 January,
    EDF Energy: Gas up 22%, electricity up 17% on 5 July,
    British Gas: Gas up 15%, electricity up 15% on 18 January,
    British Gas: Gas up 26%, electricity up 16% on 30 July,
    Scottish Power: Gas up 15%, electricity up 14% on 1 February,
    Scottish Power: Gas up 34%, electricity up 9% on 29 August,
    E.On: Gas up 15%, electricity up 9.7% on 7 February,
    E.On: Gas up 26%, electricity up 16% on 21 August,
    Scottish & Southern: Gas up 15.8%, electricity up 14.2% on 19 March,
    Scottish & Southern: Gas up 29.2%, electricity up 19.2% on 21 August,
  • A National Housing Federation report suggests almost one in four people will be in fuel poverty by next year. Fuel poverty is defined as spending more than ten percent of income on energy bills.

Mark Owen-Lloyd, head of power trading for E.On UK, said at an Ofgen seminar yesterday that a bitter winter with already high energy prices “will make more money for us.” E.On was quick to apologise for the remarks.


The government’s proposals have been received poorly by unions and many campaigning on pricing and fuel poverty.

Help the Aged‘s Mervyn Kohler described the plans as “Half-baked measures such as these are not going to address the social emergency of fuel poverty.”

Unite‘s Derek Simpson said: “It is ridiculous to believe these measures are a partial or complete solution”. Unite and other unions demand immediate relief for consumers. The TUC said there is a “moral case” for a windfall tax on the energy companies.

Paul Kenny, general secretary of the GMB union, said: “It is clear there will be no windfall tax, but there is a glimmer that the Government might take action on prices.”

A National Housing Federation spokesman said of the measures: “Ultimately many fat cat energy bosses will be able to sleep easy tonight.”

Friends of the Earth‘s greener homes campaigner Dave Timms said: “Energy efficiency is the long-term solution to the scourge of fuel poverty, but today’s proposal lacks ambition and funding and falls well short of the urgent action that is desperately required.

“Ministers are still failing in their legal duty to end fuel poverty. This is why Friends of the Earth and Help the Aged are taking the Government to the High Court next month to force it to keep its promise.”

Martin Lewis of MoneySavingExpert.com warned that people starting to pay by direct debit could be worse off in the short term. He said: “The big problem that millions of people face with direct debit is that the level is set by the energy company and can be set completely independently of the rate they are actually being charged.

“People paying by direct debit can suddenly find themselves paying more even though their rate is cheaper, if their direct debit is set too high.”

Watchdog Energywatch criticised the government’s plans as “too little too late”. Allan Asher, their chief executive, said: “The lack of political will to tackle fuel poverty is not just disappointing, it approaches negligence.

“While Government has now woken up to the scale of the challenge and is becoming alert to the need for some action, the sense of urgency is lacking. The elements that are sensible and welcome are sadly overshadowed by what is lacking.”

Mike Hobday of Macmillan Cancer Support said: “Cancer patients have to keep their heating on longer due to their ill health, resulting in higher bills – just as their income often decreases.

“Improving the energy efficiency of homes may help reduce energy bills over the long term, but immediate financial help is desperately needed to help cancer patients struggling with higher bills right now.”

Energyhelpline.com, a price comparison service, worked out that £910 million over three years and divided among 25 million households amounts to a “meagre” £10 per home.

Not all Labour MPs are happy either. Frank Field, former Labour welfare minister, said: “The government has spent all summer roaring about the package it will produce and now out pops a proposal that will probably do very little for many of the poorest pensioners meeting this year’s winter fuel bills.”

The Conservatives‘ Chris Grayling said they would not help the country or “people feeling the pinch.”

The Liberal Democrats‘ Vince Cable called them “eminently sensible, but very, very modest.” He said it was not clear how the energy companies would pay for the package and added: “The effect on the average family is completely dwarfed by the increase in energy prices that we’re all going to see.”



One comment

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