Empowering consumers will deliver greater fairness

Events over recent days show that the government’s energy policy is a total shambles. Millions face real financial hardship as a result of sky-rocketing prices, yet the Government doesn’t have a plan.

It’s in poorer areas like south London, which I represent, where rising energy prices really hurt. More people depend on prepayment meters and fewer homes are likely to be insulated because they were built before cavity walls were a requirement. This is reflected in government figures which show Lambeth has more fuel-poor households than any other inner London borough. And when you combine rising fuel bills with the high cost of housing and rising train, bus and tube fares, the result is a big squeeze on the disposable incomes of hard-working people.

It‘s clearly unfair and unnecessary. Yet most people feel powerless to act. What option have you got when the marketplace is dominated by the ‘big 6’ energy companies? I believe its time to give power to the people. I want to see active consumers with power to make decisions about their lives, rather than passive onlookers who are forced to pay more and more to heat their homes. National and local government must take a lead in giving people the power to change things. Why? Because empowering consumers will deliver greater fairness.

Here’s how we can do that on energy prices;

First it’s time for the energy regulator OFGEM to end the unfairness of the poorest paying higher energy tariffs than the rich. Why should a millionaire in a mansion pay a lower tariff than a hard pressed family on an estate? One of the starkest examples is pre-payment meters. Around 6 million people in the UK use meters. Many of these are among those on the lowest incomes. Most are unable to switch accounts or take advantage of deals to save money including direct debit and fixed rate contracts. The meters cost substantially more than the standard tariffs offered by energy companies. So the poorest end up paying hundreds of pounds more every year than those on middle and high incomes. This is unfair and should be put right by a regulator on the side of consumers.

Second, it is time to end rip-off energy exit fees. Millions of people face charges of up to £100 in ‘exit fees’ just because they want to switch their account to a lower tariff. This is anti-competitive and contradicts the Government’s advice to customers that switching accounts will save them money. The Government must change the law to make switching energy tariffs free. Why should those who act of the advice of Government and consumer groups and switch accounts be penalised just because they want cheaper fuel bills?

Third, the government has the power to place caps on the price of a range of services, for example rail fares. Yet when it comes to regulating energy companies and the cost of fuel the Government is silent. If the Government really wanted to shift power from big energy companies to consumers it would place a mandatory cap on prices. This would end the annual increases way above the rate of inflation which are forcing thousands into fuel poverty.

Fourth, it’s time to get serious about insulation. Just 15.2 million homes have loft insulation and 12.9 million homes have cavity wall insulation. Earlier this year the Energy Saving Trust said that London is at the bottom of the league table for insulating homes. Since 2008 just 5.1 per cent of London’s homes received insulation compared to 16% in the North East, the best-performing region. The Government’s Green Deal scheme was launched on October 1st to give people the chance to insulate their homes. Yet interest rates on the Green Deal loans will be as much as 7.5%. This has led to real fears that consumers will end up paying more than twice as much for their home improvements. To make the Green Deal work, ministers must ensure finance is provided at an affordable rate. That way, consumers will get greater power to make decisions about how and when to insulate their homes.

Finally we need to encourage more energy purchasing cooperatives to start up to provide competition for the big 6. In 2011 residents in Brixton set up Brixton Energy Solar 1, the UK’s first inner-city, co-operatively owned energy project on a housing estate, with support from Lambeth Council. A solar power station was installed on the roof of Elmore House on the Loughborough Estate. It’s been a great success generating renewable energy, providing an annual return of 3% for investors and delivering savings for residents of Elmore House through lower bills. We need the support of Government to champion cooperative energy to catch up with countries like the US where 42 million citizens are members of energy co-operatives. Local energy cooperatives also need support to navigate complex planning rules, manage their finances and develop their businesses. Local authorities and other big users of energy should explore how they can work together to purchase energy cooperatively and make savings which can be reinvested into services or to help those facing financial hardship.

If the Tories were really serious about creating an ‘aspiration nation’ they would act against on spiralling fuel prices. Hard working people are seeing their incomes fall before their eyes while the cost of living rises out of control. And warm words about aspiration will be of little comfort to families who will shiver in their homes this winter. Fuel poverty is a reality in our communities, but it is not inevitable. We can tackle it by putting real power into the hands of people. Enabling people to make decisions about their lives can lead us to a truly fair and just society.

Cllr Steve Reed is the Leader of Lambeth Council