Powerless in need of cheaper electricity

Early payment discounts are elusive for those who most need them.

Electricity is essential to modern life. Most of us do not realise how essential until our house suffers a power cut. Suddenly there is no light, no heat-pump, no stove, no computer, no television.

We are rummaging in the dark for a torch, candles, hoping there is gas in the barbecue and the phone is charged.

Thankfully, power cuts are rare these days and usually a local problem, quickly fixed. We demand better “future proofing” against ferocious storms because we take for granted that the power is always on.

When electricity ceased to be supplied by a government department and competing companies were set up to run the generating assets and local distribution, we were told to expect security of supply as well as competitive pricing.The security of supply has been good but competitive pricing has not meant lower costs.

As every household knows, electricity is not cheap. The monthly power bill is a major expense for all but the most affluent households.

Findings from an Electricity Pricing Review for the Government show that for 175,000 households electricity costs exceed 10 per cent of their household income, which must also cover rent or mortgage payments. Poorer households sometimes resort to borrowing to pay the power bill.

If they were able to pay the monthly bill as soon as it is due they could have a discount of 10-20 per cent from some suppliers but budgeting is never easy for households with children and the unpredictable expenses that can arise.

Early payment discounts are elusive for those who most need them and can be considered a benefit from them to the better-off, since the power companies will be recovering the cost in their charges to later payers.

The Government’s review has suggested that while electricity pricing could be fairer and cheaper, the suppliers, including the company managing the national grid, are not making “excessive profits“.

What appears to be happening is that competitive pricing is working well for customers willing to shop around. That involves comparing complex schedules and choosing the one that best fits the household’s pattern of use, or simply trusting those that offer you a better deal.

There is no shortage of competition. But a well functioning market should not require this much effort from consumers. To find the best electricity rates available to them, poor households probably need help from people they can trust.