Fuel poverty metric needs overhaul

The metric used to calculate fuel poverty levels in the UK needs to be reformed, a government advisory body has said.

The Committee on Fuel Poverty (CFP) warns that the current method of measuring fuel poverty fails to capture the full number of households struggling to pay their energy bills, in its response to Ofgem’s consultation on affordability and debt.

In particular, the body states that the Low Income Low Energy Efficiency (LILLEE) measure of fuel poverty incorrectly excludes households which have an EPC of C or above.

The body’s submission adds: “There remain far too many fuel poor households still living in homes with EPC ratings below C.

“However, it is an anomaly that a band C rating, automatically excludes a household from being considered as at risk of fuel poverty, regardless of the price of energy, according to the government’s preferred measure.

“The Committee’s conclusion is that the English LILEE measure of fuel poverty needs to be addressed thoroughly in the upcoming review of the Government’s 2021 Fuel Poverty Strategy.”

The government’s Annual Fuel Poverty Statistics show that an estimated 3.17 million people were living in fuel poverty in England in 2023.

That equates to 13% of all households in the country, effectively the same as the 13.1% of households classified as being fuel poor in 2022.

While the number of households in fuel poverty has remained steady the combined fuel poverty gap – the reduction in fuel costs needed for a household to not be in fuel poverty – was estimated at £1.32 billion under the (LILEE) metric. That equates to £417 per household, up 20% since 2022 and 64% higher than 2021’s out-turn figure of £254.

The End Fuel Poverty Coalition has previously warned that the LILLEE fails to capture the true scale of fuel poverty.

To tackle energy affordability the CFP has also called for:

• Improvements in targeting and delivery of energy efficiency programmes
• Further modelling to understand, not only the impact of the financial cost of standing charges but, also other consumer behaviour to offset bills
• Consider mandating provision of a variety of tariffs and obliging suppliers to use data on energy use to put their customers on the best combination of unit rate and standing charge for their energy usage
• Further develop discussion amongst stakeholders about the options for payment-support for those low incomes and/or vulnerable households
• Best practice expectations for supplier engagement and pathways for customers vulnerable to, or in, debt
• Consider the impacts on fuel poor/low-income households, in advance of introducing policies which add to bills
• Consider spreading the costs of, for example, new energy investment, to bill payers over longer periods of time
• Assess the stark variations, between regions, to evaluate the validity of maintaining differential regional costs
• Influence where cost collection through bills should fall, such as through different tariffs/levies for different consumer households
• Engage with the Department of Health and Social Care, DWP and NHS on how to support bill payers where energy usage is linked to health needs