Hikes raise concerns over fuel poverty

THE latest round of energy price hikes has piled further pressure on household budgets.

The average British Gas bill will rise by £400 to just over £1,300 a year after it increased gas and electricity prices by an average of 35 and 9 per cent respectively, following a similar move last week by EDF.

With the UK's four other big suppliers – ScottishPower, Eon, Npower and Scottish & Southern Energy – set to follow suit in the next few days, households across the UK face steep fuel price increases.

For every 10 per cent increase, it's estimated that 400,000 more households fall into fuel poverty (defined as when more than 10 per cent of household income is spent on fuel bills).

Energywatch Scotland estimates that even before the latest rises, about 650,000 Scots households were below the fuel poverty line. But while alleviating the strain entirely is unrealistic, it's still possible for most households to ease the burden.

Regardless of price rises, customers can save money by switching to the best deal on the market. The average customer who has not previously switched supplier can save around £250 a year, claims Confused.com.

Switching is a simple and quick process. On most switching sites, you need to enter your postcode and various details of your present current gas and electricity bills to get a list of the tariffs available in your area.

The list will typically include price, savings, power ratings and the type of package (such as dual fuel or capped) and you can then apply online for the best deal.

With prices on a long-term upward trend, capped or fixed-rate deals offer protection from future increases. Nearly three million British Gas customers are unaffected by the latest rises, either because they are locked into fixed-rate deals or they are among the 340,000 customers considered vulnerable and, therefore, shielded from price hikes until 2009.

"While online tariffs still offer the market-leading deals, these products are variable and are at risk to further price hikes," said Scott Byrom, utilities manager at comparison website money supermarket.com. "For those less willing to gamble, a fixed tariff is by far the best option."

However, Byrom added that with prices rising and providers, including ScottishPower, taking attractive fixed-deals off the market, those on offer now may not be available for long.

Fixed-rate tariffs can be up to 15 per cent more expensive than variable tariffs, but with other suppliers likely to follow British Gas with hikes of up to 35 per cent, they represent a good deal.

Providers yet to announce price rises that still have fixed or capped rates on offer include Eon and ScottishPower, although these might disappear quickly, warned Andrew Hagger, communications manager at Moneynet.co.uk. "You will find that most energy suppliers will offer their lowest variable prices if you opt for a combination of online billing and dual fuel," Hagger added.

The latest increases from British Gas, described by energy helpline.com as the "biggest energy price rise in history", mean it has the most expensive standard tariff on the market, at £1,300 a year or £110 a month. But it still has the most competitive deal across the whole market, with the Click Energy 5 tariff. At £845 a year this saves households £40 a month compared with the standard rate.

But such savings are increasingly insufficient and the latest round of increases sparked calls for more help for vulnerable households. "It looks as if it's set to be a long, hard winter, and there is always the concern that the elderly will be scared to put their heating on, which could have serious consequences," said Hagger.

"The government needs to do something to reassure pensioners and review the level of winter-fuel payments in light of these astronomical price hikes."


WHAT NEXT?

Some will be eligible for the Young Student's Bursary from the Student's Awards Agency for Scotland, depending on their family's income. The maximum award is £2,575 (whether living at home or not ) if household income is £18,820 or less a year. This reduces to £2,011 a year for income of £22,000, down to zero for a household income of more than £33,330 a year. More details at www.saas.gov.uk.

Student loans are the traditional source of assistance. In the coming academic year, the maximum loan available for students living away from home will be £4,510. All students not living at home are entitled to a non-means tested loan of £890, while up to £3,620 is available depending on income assessment. The maximum available for those staying at home is £3,570, of which all but £590 is income assessed.

You only need begin repaying once you have graduated and earn over £15,000 a year.


VULNERABLE ARE UNABLE TO ACCESS THE BEST DEALS

One of the chief weapons against energy price hikes is switching to a better deal.

But this isn't always an option for households below the fuel poverty line – of which there are at least 650,000 in Scotland, according to Energywatch – as those with energy debts cannot switch.

Recent research by the Scottish Consumer Council (SCC) found that about 9 per cent of Scottish households are in debt for electricity, compared with 5 per cent for the UK as a whole. In addition, online deals are typically the cheapest, but are not available to households without a connection to the internet.

These factors create what the SCC described as a double detriment for elderly, low-income households, where those with the greatest need of assistance and low-cost offers are the least able to access it.

"What is needed now are practical policy solutions to help people pay their energy bills," said Trisha McAuley, head of corporate resources at the SCC. "Cheaper fuel deals for low-income consumers often rely on cross-subsidy from other consumers in the form of higher bills, thus tipping more people into fuel poverty and creating a cycle of deprivation.

"We need a serious debate on whether, as citizens, we are prepared to help vulnerable consumers who cannot pay their energy bills in the same way as we do with other issues of social welfare, through the tax and benefit system."

McAuley also called on the Scottish Government to target fuel advice and assistance schemes, such as the central heating scheme and home insulation, to those who need it most as a matter of urgency.