Energy, Fuel Poverty and Climate Change

Energy, Fuel Poverty and Climate Change Energy and Fuel Poverty I n July 2007, the Queensland energy market underwent major changes. For the first time Queenslanders were able to choose which supplier they bought their electricity and gas from. Although Queensland consumers were promised significant cost savings by the Government with the introduction of full retail competition, electricity and gas prices are going up not down. Taking into account the 2007 and 2008 price increases, Queensland households have faced a 32% increase in electricity prices within the space of three years. Gas prices have increased even more. Increasing gas and electricity bills mean more Queenslanders may find themselves facing fuel poverty - unable to afford the energy they need to maintain an adequate standard of living. Fuel poverty arises from several factors, including low income, poor quality housing which increases energy costs for heating or cooling, inefficient household appliances and personal circumstances such as unemployment or ageing which lead to more hours spent at home, and inefficient energy pricing structures. The consequences of fuel poverty can include health problems, accumulated debt, and going without essential items such as food to pay for energy bills. Although the percentage of income spent on fuel and power across all households is low, in 1998-99 an estimated 260,226 households in Australia spent more than 10% of their disposable income on energy costs 1. In Queensland, households with low incomes spend higher proportions of their income on energy costs 2. Climate Change Multiple Disadvantage Some Queenslanders are far more likely to suffer poverty and social exclusion. And the effects are multiplied when individuals and families belong to more than one group. QCOSS recognises the serious disadvantage faced by: Aboriginal and Torres Strait Islander communities People in rural and remote communities Culturally and linguistically diverse communities People with a disability Young people Older people Lesbian, Gay, Bisexual and Transgender communities Climate change is happening now and Queensland is already beginning to feel the impacts: temperatures and sea levels are rising, rainfall patterns are changing and there are more extreme weather events. These impacts are predicted to get far worse, unless we cut our greenhouse gas emissions immediately. The greenhouse gas emissions of Australia and Queensland in particular, are amongst the highest per capita in the world and are continuing to increase. We are responsible for creating 30 per cent of Australia s annual emissions despite having only 20 per cent of its population 3. The significant majority of Australia s emissions come

from the energy sector due to our heavy reliance on fossil fuels. The emissions from this sector continue to grow as rapidly as our population and energy consumption. Climate change is likely to further increase fuel poverty for low income households. Policies intended to reduce greenhouse emissions through market forces, such as carbon pricing, will increase the costs of energy and other essential goods and services including food. This will disproportionately affect low income earners, who already spend a higher percentage of their income on essential items than households with higher incomes 4. Professor Ross Garnaut has estimated that retail electricity prices will rise by around 40% in the first few years following the introduction of an emissions trading scheme 5. Estimates by KPMG have predicted that electricity prices will increase by between 25% and 52% by 2020 without emission trading and up to as much as 70% with emissions trading 6. Direct environmental impacts are also more likely to affect low income earners, who are less able to take steps, such as installing insulation or efficient cooling, to deal with the effects of climate change. QCOSS endorses the need for urgent and significant action to reduce emissions that negatively impact on climate. However, given that climate change is recognised as having a disproportionate impact on people living on lower incomes, QCOSS calls on the State Government to develop a response to fuel poverty that recognises the interconnections between energy, social and environmental policies and that not only conserves energy and contributes to our global responsibilities to reduce greenhouse emissions but also minimises energy-related hardship. Key Issues People living on lower incomes have been found to pay disproportionally more for essential services such as energy and water for a variety of reasons 7. These include the relative thermal inefficiency of many public and private rental dwellings; the added cost of late payment, reconnection and other types of fees from the utility 8, debt spirals and associated credit problems resulting from essential service charges 9,10. Under-consumption of energy is already common in many low income and vulnerable households. Therefore, there is limited capacity to reduce usage further without further decreasing standards of living and increasing social exclusion. Prices are likely to rise further in 2010-11 as a result of a distribution price reset and a review of both retail tariffs and the methodology used to set the regulated price of electricity. An increase in the fixed cost component of electricity bills is likely to disproportionately impact on low volume, low income households, and therefore government assistance programs need to be reviewed and reset accordingly. Queensland has the highest disconnection rates per 100 customers in the country 11. In 2007-08 energy suppliers paid more than $150,000 to customers for not meeting service standards, primarily for failing to make connections by the agreed date and for wrongful disconnection 12, and between September 2008 and July 2009 retailers paid $113,555 for material billing errors 13. The number of complaints made to the Energy Ombudsman Queensland continues to increase. Nearly 70% of all complaint investigations involved account issues, including payment difficulties, incorrect fees and charges, and issues with energy bills 14. Problems with connection and disconnection were also common. 2 P age Climate Change and Energy

Energy is an essential service, and as such, access is a prerequisite to social participation and adequate standards of living (Victorian Department of Infrastructure. Government Energy Consumer Hardship Policy Statement. 2005) 15 There is a low take up of the Home Energy Emergency Assistance Scheme suggesting that many households are unaware of this assistance, and that retailers may not be promoting the program. As this program has recently been reviewed by the Queensland Government and changes have been made, QCOSS will monitor whether these changes result in improved access to the program. Many low-income and vulnerable households cannot realise the benefits of energy efficient technologies and appliances because the relatively large, upfront capital investment is too great. Many residents living in poor quality, low cost housing are in private rental or public housing and do not have the rights or incentives to make capital improvements to the energy efficiency of their housing and therefore reduce ongoing energy consumption costs. Recognising Progress The Queensland Government has already introduced a range of policies and programmes to assist households with a changing energy market and to tackle climate change. Energy Consumer Protections In the move to deregulation of the electricity and gas industry in Queensland a range of consumer protection measures have been put in place to protect consumer access to these essential services. These include: Developing the Electricity and Gas Industry Codes which set out rules for electricity and gas retailers and distributors and establishing an Energy Ombudsman. Taking action to ensure retailers minimise billing errors through the Retail Billing (Guaranteed Service Level (GSL) Scheme) Code. Providing financial assistance to help keep energy affordable, including the pensioner, seniors and concession card rebate for electricity and reticulated gas, the Home Energy Emergency Assistance scheme, the Electricity Life Support Concession Scheme and providing funds to subsidise the costs of providing energy to consumers in rural and regional Queensland. Funding an energy consumer advocate position. Climate Change The State Government s response to climate change has included: Evaluating the states framework for action on climate change (ClimateSmart 2050) and the development of a revised framework ClimateQ: Towards a Greener Queensland. Setting targets to guide and monitor progress including Towards Q2 s aim to cut Queenslanders greenhouse gas emissions by one-third by 2020. Climate Change and Energy Page 3

Supporting research to better understand the effects of climate change, including establishing the Queensland Climate Change Centre of Excellence. Taking steps to reduce the overall emissions intensity of Queensland s energy generation, including setting a 10% renewable and low emission energy target requiring electricity retailers to purchase a set amount of energy from renewable and low emission energy sources, investing in carbon capture and storage projects, providing funding for renewable energy generation projects and increasing the Queensland Gas Scheme to 18%. Programmes to help Queensland householders, community groups and businesses reduce their greenhouse gas emissions, including the ClimateSmart Home Service and Rebate programs, the ClimateSmart Communities program, Smart Energy Savings Program and Fund, the Solar Hot Water program and the Solar Homes program and feed-in tariff for solar power. Taking measures to prevent the sale of inefficient air-conditioning appliances. QCOSS Recommendations 1. Increase and expand the energy concessions and rebates framework to ensure that it meets the increased costs of energy and transport, including those resulting from the Carbon Pollution Reduction Scheme, and provides more effective assistance to those in financial hardship. This should include: monitoring access to the Home Energy Emergency Assistance Scheme to enhance its role in providing assistance to customers requiring assistance with energy bills. expanding the existing pensioner concessions to health care card holders in order to better target low-income and disadvantaged households. examining the need for additional targeted subsidies to households with unavoidably high energy costs (for example, due to medical conditions). identifying an appropriate way to provide rebates and concessions to eligible consumers who receive electricity in on-selling situations. 2. Strengthen the Queensland legislative and regulatory customer protection framework for energy utilities to ensure that at a minimum it reflects current best practice and is underpinned by a commitment to ensuring that consumers maintain access to this essential service, including: updating the Electricity and Gas Codes of Conduct to enhance their roles in mitigating consumer hardship. ensuring that bottled LPG gas consumers have access to the same consumer protections afforded to reticulated gas and electricity consumers. exploring the feasibility of phasing-out prepayment meters and in the meantime introducing consumer protections for those consumers currently dependent on prepayment meters. 4 P age Climate Change and Energy

3. Ensure that a future transition to a National customer protection framework in Queensland maintains or introduces best practice in consumer protections and is underpinned by a commitment to ensuring that consumers maintain access to energy services. 4. Ensure that the policy and regulatory frameworks for energy provide fair and affordable households tariffs for at least a basic level of consumption, including: broadening the range of factors to be taken into account in determination of regulated electricity prices to include consideration of the social impacts of energy pricing. exploring the feasibility of introducing a lifeline/social tariff for energy ensuring that a basic amount of electricity and gas are available and affordable for all Queenslanders. proceeding with caution in the roll out of smart meters, including in any program of trials a focus on the real world costs and benefits for low-income households. 5. Develop and fund a comprehensive state energy efficiency strategy with a particular emphasis on low-income and vulnerable households including: Introducing a state based mandatory energy efficiency target, delivered through white certificate trading creating a market for retrofit energy efficiency actions in the residential, industrial and commercial sector, and structured such that priority groups such as lowincome households are allocated separate targets. Develop a comprehensive household energy efficiency audit and education program for low-income households, with appropriate follow-up. Accelerating and improving mandatory efficiency performance for appliances, including introducing a minimum energy star rating for pool pumps. Establishing an energy efficiency appliance improvement program for disadvantaged households, which includes assistance for the repair, recycle, retrofit, exchange or replacement of essential appliances such as refrigerators and hot water systems. Improving energy efficiency of residential properties for low income Queenslanders, including funding for retrofitting of public housing properties and incentives to encourage landlords to retrofit low cost housing. Exempt low-income households from the $50 ClimateSmart Home Service fee. Climate Change and Energy Page 5

1 National Institute of Labour Studies. Household Energy Expenditure: Measures of Hardship & Changes in Income. 2004. 2 Australian Bureau of Statistics. Household Expenditure Survey 2003-04 (Reissue). Cat. No. 6530.0. 3 Department of the Premier and Cabinet. Towards Q2: Tomorrow s Queensland. 2008. 4 Commonwealth of Australia. The Garnaut Climate Change Review: Final Report. 2008. 5 Commonwealth of Australia. The Garnaut Climate Change Review: Final Report. 2008. 6 KPMG. A national energy efficiency program to assist low-income households. 2008. 7 Public Interest Advocacy Centre. REFIT: A Social justice and Environmental Pilot Project, 2003. 8 Consumer Law Centre Victoria (CALC). Do the Poor Pay More? A Research Report, Anna Stewart (ed.). 2005. 9 Consumer Law Centre Victoria (CALC). Do the Poor Pay More? A Research Report, Anna Stewart (ed.). 2005. 10 Committee for Melbourne. Utility Debt Spiral Project Report, Final Report of the Utility Debt Spiral Project. 2004. 11 Essential Services Commission, Energy Retailers Comparative Performance Report, December 2008. 12 Queensland Competition Authority, Annual Report on MSL and GSL Performance, June 2008. 13 Queensland Competition Authority, Billing Code- Retailer Performance 1 April - 30 June 2009 (Oct 09) and Year 2008-2009. 14 Energy Ombudsman Queensland, EOQ Update, Issue No. 5, August 2009. 15 Victorian Department of Infrastructure. Government Energy Consumer Hardship Policy Statement. 2005. This paper is part of QCOSS s policy platform that contains over 20 policy papers. Go to www.qcoss.org.au for other papers including Mental Health, Violence Prevention, and Social Inclusion. Ground floor, 20 Pidgeon Close (off Beesley St), West End Qld 4101 PO Box 3786, South Brisbane Qld 4101 Ph: (07) 3004 6900 Fax: (07) 3004 6999 Toll Free 1800 651 255 Email: qcoss@qcoss.org.au Website: www.qcoss.org.au 6 P age Climate Change and Energy