Select Committee on Trade and Industry Sixth Report


2. FUEL COST

10. The cost of domestic electricity and mains gas has come down in recent years and this fact alone accounts for up to a million of the one and a half million households estimated to have been lifted out of fuel poverty between 1996 and 2000.[13] But fuel prices will not continue to fall indefinitely; demand worldwide continues to increase and many of the efficiency benefits brought by the introduction of competition to the UK gas and electricity markets have now fed through the system. The move — for sound environmental reasons — to renewable sources of energy will also, at least in the short term, increase energy prices. Indeed, many commentators believe that for a variety of reasons prices will rise.[14] Nor have the recent price reductions benefited all households: many of the poorest either are not eligible for or do not take advantage of the cheaper tariffs offered by suppliers, and over a million people in fuel poverty do not have access to mains gas, and as a result pay an estimated 40 per cent more for their energy than those who do.[15] Furthermore, although cheap fuel is good news for the fuel poor, it is very likely to be bad news for the environment.[16]

Extending the gas network

11. Access to cheaper fuels, particularly mains gas, would alleviate some of the problems associated with the poor energy efficiency of the housing stock. And although extending the gas network to everyone would be prohibitively expensive, there is much evidence to suggest that it could prove a financially viable means of significantly improving the living conditions of many. For example, figures in the Report of the Working Group on Extending the Gas Network suggest a cost of around £670 per dwelling for settlements of 750 homes within 2 km of an existing gas main,[17] while Mr Wilson told us: "To get 100,000 households out of fuel poverty in this way might cost about £50 million so the cost per unit is very high".[18] But in the long run, a unit cost of around £500 per dwelling would not seem so very high if it removed future inhabitants of that property from vulnerability to fuel poverty. Indeed, DTI has sought funding for pilot schemes to establish the feasibility of this option. So far, the Treasury has not been persuaded to provide the necessary £50 million but we recommend it do so as soon as possible: further delays will significantly lessen the impact any such pilots could be hoped to have had by 2010. But we also conclude that over-reliance on low fuel prices will not deliver the Government's target for alleviating fuel poverty particularly as, for reasons we set out in our Report on Security of Energy Supply, the price of gas may not remain at its recent very low level.[19]



13   Q 156 (DTI) Back

14   See for example Second Report; paras 8-10, and 96-98. See also Q 193 Back

15   Qq 14-15 (Energywatch) Back

16   Q190  Back

17   III, 12 Back

18   Q 164 Back

19   Second Report, paras 8-10 and 96-98 Back


 
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