How can we get the measure of rural fuel poverty? 

Some households need to spend a high proportion of their income to keep their home at a reasonable temperature. While there are national and local policies and initiatives which seek to support these households to alleviate their fuel poverty, some commentators have suggested that the COVID-19 pandemic and the tragedy unfolding in Ukraine is worsening fuel poverty and more now needs to be done. While here in the UK there are immediate concerns about customer’s ability to pay their energy bills, fuel poverty is a significant and long-standing issue for all too many people, and its impact is felt across many areas of life. How much of an [increasing] issue is fuel poverty in rural areas, and what more can be done about it? Jessica Sellick investigates. 

………………………………………………………………………………………………..

What is fuel poverty? In general, it relates to households that have to spend a high proportion of their household income to keep their home at a reasonable temperature. 

The Warm Homes and Energy Conservation Act 2000 committed Government to publishing a strategy ‘to ensure that so far as reasonably practicable persons do not live in fuel poverty’. This adopted a measure that a household was fuel poor if, by modelling the energy efficiency of the home, more than 10% of net income would have to be spent on fuel to reach particular temperature standards and meet other needs. The 2010 Autumn Statement announced an independent review of the fuel poverty definition and measure. 

This  Review, commissioned in 2011, highlighted three key ways in which fuel poverty is a serious national problem: 

  • From a poverty perspective: households with high energy costs living in poverty or on its margins face extra costs to keep warm above those for typical households with much higher incomes. 
  • From a health perspective: living at low temperatures as a result of fuel poverty is a significant contributor to both excess winter deaths and a number of incidents of ill-health, placing additional demands on the health and social care systems. 
  • From a carbon reduction perspective: the energy inefficiency of homes affects the ability to reduce carbon emissions, with fuel poverty providing a further barrier in terms of the implementation of policies to mitigate climate change since those on low incomes are often least able to afford any increases in prices that may result from them. 

The report emphasised the overlap between low income and the energy inefficiency of the homes people live in. The authors recommended using a definition and measurement focused on ‘individuals in households living on a lower income in a home that cannot be kept warm at reasonable cost’. The review further suggested fuel poverty should be measured by looking at low income households facing high energy costs. 

In 2013 the Government published a consultation and its response, accepting many of the review’s recommendations including measurement of income after housing costs adjusted for family size; and adopting a Low Income High Costs (LIHC) framework as a new indicator of fuel poverty and a means of assessing it. Under the LIHC measure, a household was considered to be fuel poor if they had required fuel costs that were above average [the national median level]; and if they were required to spend that amount they would be left with a residual income below the official poverty line.  

In 2021 the Government introduced a new definition of fuel poverty. Called the ‘Low Income Low Energy Efficiency’ (LILEE) indicator, a household is considered to be fuel poor if: (a) they are living in a property with an energy efficiency rating in bands D, E, F or G; and (b) their disposable income – income after housing costs and energy needs – would be below the poverty line. 

Non-governmental organisations use other definitions and measures for fuel poor households. The National Energy Action (NEA), for example, define a household as being in fuel poverty if ‘it needs to spend more than 10% of its income on energy in order to maintain a satisfactory heating regime’. Fuel poverty is a devolved policy area and defined differently in the other UK nations. The Welsh Government definition aligns with the NEA in defining a household as being in fuel poverty if ‘they would have to spend more than 10% of their income on maintaining a satisfactory heating regime’. The Northern Ireland Assembly’s definition is more specific, defining a household as fuel poor if ‘in order to maintain a satisfactory level of heating (21 °C in the main living room and 18 °C in other occupied rooms), it is required to spend more than 10% of its household income on all fuel use’. The Scottish Government introduced a two-part definition in 2019 and has a broader interpretation, defining fuel poor households where (1) after housing costs have been deducted, more than 10% [20% for extreme fuel poverty] of their net income is required to pay for their reasonable fuel needs; and (2) after further adjustments are made to deduct childcare costs and any other benefits received for a disability or care need, their remaining income is insufficient to maintain an acceptable standard of living [defined as being at least 90% of the UK Minimum Income Standard].   

Regardless of which definition is applied, the causes of fuel poverty are underpinned by three key factors: (i) a household’s income, (ii) fuel prices, and (iii) energy consumption – which can be affected by the energy-efficiency of the household’s dwelling. In a rural context, fuel poverty is often driven by rising fuel prices, an ageing housing stock that is not thermally efficient, a lack of access to natural gas supplies, and/or the costs of delivering fuel to more sparsely populated areas. 

How many people are living in fuel poverty? 2020 is the latest year for which statistics are available in England – with the Department for Business, Energy & Industrial Strategy (BEIS) publishing its fuel poverty statistics report in February 2022. In 2020 it was estimated that 3.16 million households (or 13.2% of all households) in England were fuel poor under the LILEE definition. The data shows the proportion of households in fuel poverty declined by 34% between 2010 and 2019 (equating to some 1.6 million households). The depth of fuel poverty, known as the fuel poverty gap, has also declined in England. This measures the amount by which the energy costs of a fuel poor household exceed the high costs threshold (i.e., the cut in energy costs that would lift a household out of fuel poverty). The data reveals how the mean average fuel poverty gap reduced from £339 in 2010 to £223 in 2020.  

The Statistical Digest of Rural England identified 12% of households in rural areas to be in fuel poverty. While historically fuel poverty was seen to be more prevalent in rural areas, since 2017 urban areas have had the greater proportion of fuel poor households (with 13.8% of urban households and 11.6% of rural households fuel poor in 2019). However, the fuel poverty gap is larger in rural areas compared to urban areas – with the average fuel poverty gap for fuel poor households in rural villages, hamlets and isolated dwellings £585 in 2019 compared to an average fuel poverty gap of £216 for all fuel poor households. Similarly, using the LIHC measure, the average fuel poverty gap for urban households decreased between 2011 and 2019 whereas in rural areas this gap widened over the same period.  

The Government has projected fuel poverty levels in England in 2021 and 2022 under the LILEE definition. The forecasts reveal how the proportion of households defined as fuel poor are expected to fall from 13.2% in 2020 to 12.8% in 2021 and 12.5% in 2022. This fall is attributed to improvements in the energy efficiency of homes between 2020 and 2022, expected growth in low income deciles, and a support package for energy bills announced in February 2022. However, the depth of fuel poverty is projected to increase over this period, from £223 in 2020 to £233 in 2021 and £258 in 2022. This is being attributed to the default tariff price cap announced for summer 2022 resulting in higher energy prices in real terms. The energy price cap increased by 12% in October 2021 and by 54% in April 2022, an increase of some £700 for ‘typical levels of dual fuel consumption paid by direct debit’. Many observers are predicting a further increase in October 2022, possibly by a further 50%. Will the depth of fuel poverty in rural households also increase over this period? 

There is a 2-year lag in many of the statistics presented here, with some of these figures based on actual data from 2018. This makes understanding the levels and depth of fuel poor households in real time difficult. Furthermore, what would applying a rural lens through the data we already collect reveal (e.g., analysing the figures using the Rural Urban Classification and/or providing rural projections?) 

What is Government doing? In England, the Government has set a statutory fuel poverty target. This is based on Energy Performance Certificates (EPCs) for fuel poor homes and was produced as part of a fuel poverty strategy back in 2015: ‘the fuel poverty target is to ensure that as many fuel poor homes as is reasonably practicable achieve a minimum energy efficiency rating of band C by 2030’. The Government also set interim targets of EPC band E by 2020 and band D by 2025. 

The latest published fuel poverty statistics (for 2020) show an estimated 97.2% of low income households were in properties with an energy efficiency rating of band E or higher; 90.1% were in band D or higher; and 52.1% were in band C or higher. 

In July 2021, the Committee on Fuel Poverty (CFP), a Non-Departmental Public Body sponsored by BEIS, assessed progress towards delivering the 2025 and 2030 targets. Using the LILEE measure, they found the number of fuel poor households living in bands E, F or G had not materially changed, and that the number of households living in bands B and D homes considered fuel poor had increased to 1.14 million. The CFP described how the 2020 band E milestone had been missed – with only half of the 293,000 bands F and G fuel poor homes at the start of 2015 upgraded to band E or above by 2020. Although there were more than sufficient funds available to deliver the 2020 milestone, the CFP cited how only 10-30% of programme budgets were received by fuel poor households; and only a very small percentage of the funds were aimed at those in the deepest levels of fuel poverty. The CFP further highlighted how the Government is just over 50% towards achieving the 2025 band D milestone and that future progress with current programmes is forecast to be slow. 

The Government published an updated fuel poverty strategy in 2021. This set out several policies to improve fuel poverty, including: 

  • £60 million of additional investment to retrofit social housing and £150 million for the Home Upgrade Grant. 
  • An expansion of the Energy Company Obligation (ECO) requiring larger domestic energy suppliers to install heating, insulation, or energy efficiency measures into the homes of people on low incomes, vulnerable or fuel poor. 
  • An extension of the Warm Home Discount, a requirement for energy companies to provide a £140 rebate on the energy bill of low income older people and other low income households with high energy bills. 
  • Drive over £10 billion of investment in energy efficiency through regulatory obligations in the Private Rented Sector. 

These policies are intended to sit alongside other, existing measures to alleviate fuel poverty, including but not limited to: 

  • Winter Fuel Payment: a tax-free annual payment made to assist older people  in meeting the costs of their winter fuel bills. 
  • Cold Weather Payment: payments made during very cold periods of weather to some recipients of welfare benefits (e.g. income support, universal credit, pension credit). 
  • The Green Deal Finance Company (GDFC) which provides loans for home efficiency improvements. 
  • Social Housing Decarbonisation Fund (SHDF): there are currently 19 demonstrator projects in 17 Local Authorities in receipt of £62 million to learn lessons and gather innovation in retrofitting. 
  • Default Tariff Cap: a limit set on the amount that suppliers can charge certain consumers for a unit of energy. The cap is reviewed twice yearly, most recently in February 2022 where Ofgem increased the level of the cap to respond to rising wholesale prices and additional costs for suppliers during COVID-19. The current level runs from 1 April 2022 to 30 September 2022 and is due to be reviewed again by Ofgem in August.     

In February 2022, the Government announced further support to help households with higher bills. This includes a £150 Council Tax rebate in April 2022, and a £200 upfront discount off bills in October 2022 which will have to be repaid through energy bills over the following 5-years. 

As indicated in the 2011 Review, Government policy on fuel poverty impacts upon a number of policy areas. I offer three examples. 

The first example is energy efficiency which is seen as one of the key ways of alleviating fuel poverty. The Fuel Poverty Energy Efficiency Rating (FPEER) is a measure of the energy efficiency of a property. According to the Statistical Digest for Rural England; rural village, hamlet and isolated dwelling households with the poorest FPEER rating of F or G had an average fuel poverty gap of £1,213 compared with an average fuel poverty gap of £856 for urban households with the same energy rating. The Climate Change Committee (CCC) has emphasised how energy efficiency is key to decarbonisation as it reduces energy consumption and furthermore how it is important to address fuel poverty to ensure a ‘just transition’. 

The second example is health and wellbeing – with cold homes having negative impacts on a person’s physical and mental health. The Cold Weather Plan for England published by the UK Health Security Agency and NHS in October 2021, for example, describes how the health impacts of cold homes include increased risk of heart attack or stroke, respiratory illnesses, poor diet [heat or eat choices], and worsening or slow recovery from existing conditions. The Plan calls for a strategic approach to reduce excess winter deaths across local health and social care economies.  

The third example is the economy where energy efficiency can lead to job creation and provide greater energy security. Back in 2019, the House of Commons BEIS Committee estimated that energy efficiency measures could sustain between 66,000 and 86,000 jobs across the UK; prevent expensive investments in infrastructure; and increase the UK’s prominence as an exporter of insulation and retrofit goods and services.   

For the most part, these interventions and schemes take broad approaches: incorporating improved insulation, replacing old or inefficient heating systems, and/or reducing home energy bills for householders. How do these measures to alleviate fuel poverty affect rural residents? For example, how do these measures work for 4 million UK households who are ‘off grid’, meaning they do not receive mains gas and rely upon heating oil or liquid petroleum gas (LPG)? It is estimated that a typical household heated by oil will use 1,500-2,500 litres a year. According to BoilerJuice, the price per litre increased from £46.50 in September 2021 to £156.51 in March 2022. While gas and electricity prices are capped, heating oil prices are not. Moreover, data from Savills suggests that rural dwellings are often less energy efficient – with EPC ratings of E and D in hamlets compared to ratings of C and D in towns and cities. 

Taken as a collective, and in light of the CFP’s assessment, how do we know how successful these initiatives are [in rural communities and places] and what their return on investment is? How do, or can, these interventions consider the vulnerability of certain people living in cold conditions – especially when the evidence suggests rural households are more likely to suffer negative impacts as a result of their fuel poverty? And how can the approach taken join up policies and initiatives from across Government departments (e.g. with health, environment, and economy)?    

What impact has COVID-19 had? Analysis from Uswitch back in March 2020 suggested that some consumers would need to spend an extra £52 million a week on household energy bills as 16.8 million people stayed at home due to the pandemic – equating to an extra £16 for some households a month and £195 a year for those on Standard Variable Tariffs. The calculations were based on estimates that people working from home would use an additional 25% more electricity and 17% more gas each every day.  

The NEA’ fuel poverty monitor report 2019-2020 analysed how COVID-19 had impacted on vulnerable energy consumers and the organisations that support them. Five main impacts on fuel poor households were identified: (i) an increase in energy use due to more people spending time at home; (ii) a reduction in income as jobs were lost or placed on furlough; (iii) increased affordability issues and debt leading to energy rationing; (iv) reduction in smart metre/ECO installations; and (v) difficulties accessing support, especially for digitally excluded households or those with English as an additional language. 

During the pandemic the Government launched a range of measures to support vulnerable customers. These included new measures to ensure prepayment and pay-as-you-go customers remained supplied with energy; and new protections for customers struggling with their energy bills over winter.  

Citizens Advice highlighted three major risks facing consumers over the winter months in the period 2020-2021: (1) many people are struggling financially – with an estimated 2.8 million people behind on their energy bills due to COVID-19; (2) as people were forced to spend more time at home their energy usage would be higher than normal – and those unable to top up their energy or reduce their usage for fear of higher bills could face negative impacts to their physical and mental health; and (3) energy companies are also facing financial pressures and having to adapt their services. Citizens Advice called on the Government to do more to top up existing support schemes. 

What more can be done, and needs to be done, to tackle fuel poverty?In January 2022, Rural England and the Countryside and Community Research Institute (CCRI) published the results of their study on the lived experiences of customers in vulnerable situations in rural England. The researchers identified rural specific vulnerability factors associated with the age, isolation and basic service infrastructure (e.g., transport, communications).Many utility companies identify vulnerable users – and some have a ‘hierarchy of vulnerability’ with older people with disabilities or suffering chronic illness a priority. It was suggested that more needs to be done to promote the Priority Services Register (PSR) so as to both increase the number of people registering and also raise awareness of the support available to householders already on the register.  

From an international perspective, an evidence review of rural fuel poverty compiled in 2018 suggests locally delivered projects targeted at localised needs can reach significant numbers of households in fuel poverty, and that partnership working can leverage in additional funding and benefits. While some of the schemes collated by the researchers reduced household energy consumption through quick and cheap measures, the evidence also suggests that alleviating fuel poverty requires long-term measures that focus on improvements in housing stock. 

There are a plethora of examples from across rural England that seek to tackle fuel poverty. At a national level there are initiatives such as Fuel Bank, a collaboration between npower and the Trussell Trust which works from selected foodbanks and advice agencies to help customers who have problems with prepayment meters. Local Authorities have leveraged in additional funding for small schemes tailored to local needs (e.g. Warm Homes Eden). Back in 2013, Plymouth City Council recognised the role of community energy in addressing fuel poverty and carbon emissions and set up Plymouth Energy Community – making the link between communities, housing and renewables. For those off-grid, charities and voluntary and community sector organisations often run bulk oil buying schemes, although some of these schemes have been temporarily suspended because of unpredictable prices. 

A volatile energy market and poorly insulated housing stock means it is unlikely that fuel poverty will be eliminated in the near-future in rural areas. Therefore, do we need to prioritise support, perhaps focusing on those residents that are most vulnerable and/or facing the highest costs and/or geographic areas with household above average needs and costs? Or should we avoid a ‘worst first’ approach to ensure all fuel poor households are able to receive some form of support?  

What does the future hold? Will more rural residents face choosing between heating or eating or indeed be left struggling to be able to do either? What more can be done be done to tackle fuel poverty and prevent rural residents from being left out of the cold? In the short term, how can we ensure ‘rural’ features more prominently in Government support and in its annual debate on fuel poverty? And, in the longer-term, how can we invest in the housing stock in rural areas, and look at rural resident’s incomes?   

…………………………………………………………………………………………………

Jessica is a researcher/project manager at Rose Regeneration and a senior research fellow at The National Centre for Rural Health and Care (NCRHC). She is currently working with young farmers to gather their views on future land use; helping public sector bodies to measure their social value; and evaluating employability schemes and a veteran programmes. Jessica also sits on the board of a Housing Association that supports older people and a charity supporting Cambridgeshire’s rural communities. 

She can be contacted by email jessica.sellick@roseregeneration.co.uk. 

Website: http://roseregeneration.co.uk/https://www.ncrhc.org/ 

Blog: http://ruralwords.co.uk/ 

Twitter: @RoseRegen