Let’s have a radical rethink of how we charge for domestic gas and electricity
GIVEN the Prime Minister’s recent call for innovative solutions to the current coat of living crisis, may I put forward for discussion a proposal to reform the pricing structures for domestic gas and electricity that may go some way towards addressing two of the major issues that the country faces, namely fuel poverty amongst those on low incomes and overconsumption of energy by those at the higher end of the nation’s income distribution?
First, the standing charges should be abolished. This is a regressive charge that penalises low consumers of power. A household with both gas and electricity is now paying more than £5 per week before consuming any power and so someone struggling financially and trying to consume as little power as possible is paying an excessive rate per kwh for the little energy they use.
Secondly, every household in the UK should be entitled to a modest amount of power, say 1500kwh of electricity and 5000kwh of gas annually that would equate to the consumption of a modest two-bedroom home, at an affordable price set by government. My figures here are educated guesswork, so if they are wildly unrealistic, I apologise.
Thereafter, energy prices should rise progressively in bands, much like income tax. Just for debate, let’s say the next 1500kwh of electricity and 5000kwh of gas would be priced at the actual cost of the power (however that may be calculated), but beyond that, the power companies could set the bands and the tariffs as they saw fit to make an appropriate profit on their domestic energy sales while maintaining their market share.
The loss to the companies from the abandonment of the standing charge should be replaced by an increased unit charge on the higher bands of consumption. I would expect the pricing of bands to rise relatively steeply, thus providing a big incentive for large consumers to take effective means – improved insulation, heat pumps, solar panels and so on – to significantly reduce their fuel consumption.
The scheme should be kept as simple as possible. One issue to be addressed would be electricity-only households where the basic-priced 5000kwh of gas entitlement should be converted into an appropriate additional base price electricity band. Another, households with high consumption due to health issues should receive appropriate help either through the benefit system or the NHS. For instance, a person requiring power-hungry medical equipment in their home could get an additional free or basic-cost energy allowance via a “prescription” that would be passed to their energy company, the company then reclaiming the cost from the appropriate government department. Another would be large families in necessarily large houses with a low total household income – dealing with this situation I suggest is best left with the benefits system.
So, two birds with one stone: affordable energy for low-income households and pressure on everyone, even the highest earners, to reduce their domestic energy consumption and help save the planet.
Des Mcghee,
Milngavie.