Energy Affordability in the UK: Corrected Energy Expenditure Shares 1992-2014

David Deller and Catherine Waddams Price
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Catherine Waddams Price: Centre for Competition Policy and Norwich Business School, University of East Anglia

No 2018-08, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: The retail energy market in the UK is highly politicised and since the turn of the millennium successive governments have pursued significant policies designed to ease the affordability of energy for certain groups. One of these policies, namely Winter Fuel Payments, represent both a significant increase in resources targeted at affordability support and a shift in emphasis from those on low incomes towards the elderly. This paper tracks the proportion of household expenditure devoted to energy between 1992 and 2014, implementing a major new correction to energy expenditure for households with prepayment meters, who tend to be low income households. First, the time series is used to argue that the political salience of distributional concerns in the retail energy market should not come as a surprise. Second, we find that while households with a head aged over 80 have elevated energy expenditure shares (similar to households at the bottom of the income distribution), pensioners aged 65-70 have energy expenditure shares comparable to households at the middle of the income distribution. Third, mapping major policy developments against the time series shows the most generous and ambitious affordability support schemes were introduced when energy was nearing its most affordable over a 35-year period, suggesting political considerations influenced both the recipients of support and the timing of interventions.

Date: 2018-09-01
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Juliette Hardman, Center for Competition Policy, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK

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