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.
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.
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.
Furthermore, although cheap fuel is good news for the fuel poor,
it is very likely to be bad news for the environment.
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, 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".
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.
13 Q 156 (DTI) Back
See for example Second Report; paras 8-10, and 96-98. See also
Q 193 Back
Qq 14-15 (Energywatch) Back
III, 12 Back
Q 164 Back
Second Report, paras 8-10 and 96-98 Back