Part 2: Schemes for Reducing Fuel Poverty Summary and Background
39.The Warm Homes and Energy Conservation Act 2000 set the framework for the definition of fuel poverty in England and Wales such that a person is regarded as living “in fuel poverty” if the person is a member of a household living on a lower income in a home which cannot be kept warm at reasonable cost. This Act committed Government to publishing and implementing a strategy to tackle fuel poverty.
40.The UK Fuel Poverty Strategy was published on 21 November 2001 and explained that Government policy to tackle fuel poverty would be based on the widely accepted definition that a fuel poor household is one which would need to spend more than 10% of its income on all fuel use and to heat its home to an adequate standard of warmth. This definition encompasses the three drivers of fuel poverty: the energy efficiency level of the home; the level of household income; and energy prices. The impact of rising fuel prices in recent years has been to increase the number of fuel poor households as quantified by the UK Fuel Poverty Strategy: 7th annual progress report 2009(7).
41.As part of the Fuel Poverty Strategy, the Government negotiated an agreement with UK gas and electricity suppliers in 2008 under which they agreed to offer assistance with energy costs to vulnerable customers. The combined spending by suppliers will be at least £150 million in the final year of the agreement (April 2010 to March 2011). Suppliers are free to choose the level and type of assistance offered to vulnerable customers within a broad framework monitored by Ofgem. Support measures provided include social tariffs(8), debt relief, the installation of energy efficiency measures and trust funds (which fund measures such as direct assistance to customers in debt, third party projects or organisations aimed at helping customers in fuel poverty).
42.This Part sets the statutory framework for schemes to replace and extend the support mechanisms available under the Voluntary Agreement when it comes to an end in March 2011. It will also set the framework for the provision of mandatory social price support (direct assistance with energy bills) to more of the most vulnerable consumers by energy suppliers. The details of the schemes, such as the nature of the benefit and eligibility criteria, will be set out in secondary legislation after consultation during Summer 2010. The 2009 Pre-Budget Report confirmed that suppliers will be required to make available at least £300 million p.a. by 2013-14.
43.In order to avoid any unforeseen distortions to the market, the framework will include a reconciliation mechanism to allow the costs of the schemes to be shared equitably between suppliers.