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How should we measure fuel poverty?

Improving the Hills approach to measuring fuel poverty

In March 2011, Professor John Hills was appointed to lead a review of the Government’s fuel poverty definition and target. The final report, published in March 2012, found that there were significant flaws in the way fuel poverty was measured.Professor Hills proposed an alternative approach, which defined a fuel poor household as one with a low income and facing high costs.  ACE Research has engaged extensively with the Hills fuel poverty review in recognition of its profound implications for low income consumers, Government fuel poverty policy and wider energy and welfare policies.

DECC propose to adopt the Hills approach as the Government’s new definition of fuel poverty, and ran a consultation on this from September to November 2012.  ACE’s response to this consultation can be accessed here.

Consumer Focus also commissioned ACE Research to further investigate the Hills proposals and to put forward alternative suggestions. The result was a report entitled “Improving the Hills approach to measuring fuel poverty”.  In this research we follow the overall Hills framework but propose improvements that better reflect the ability or otherwise of low income households to afford their energy services.

The research concludes that Professor Hills has made a valuable contribution to our understanding of fuel poverty by:

  • Reasserting the importance of fuel poverty as a serious and urgent problem that is distinct from general poverty.
  • Recognising the serious impact of fuel poverty and cold homes on physical and mental health, well-being and premature mortality.
  • Confirming the central role of capital investment in energy efficiency as the long term sustainable solution to fuel poverty and the need to complement such investment with fuel price, tariff and income measures.
  • Re-defining ‘low income’ within the fuel poverty equation such that the definition is now consistent with other poverty definitions and recognises the logic of excluding fuel costs.
  • Recommending a new indicator (the ‘gap indicator’) that measures the severity of fuel poverty, as well as the number of households in fuel poverty. We have made use of a gap indicator, based on the current definition, in a number of our reports and submissions to Government in the past.

However, we have serious concerns about Hills’ proposed definition of high energy costs, both with respect to its failure to reflect fuel affordability and with respect to the fact that it makes ‘it almost impossible to literally eradicate fuel poverty’. Indeed the Government recognises this feature of the Hills definition itself and is considering changing legislation to reflect the proposed change.

In the report, we put forward practical proposals for addressing these flaws, focussing on technical improvements to the Hills approach, and showing how these improvements could improve targeting. We believe that these proposals develop the Hills approach considerably and provide us with an indicator far better suited to capturing the reality of fuel poverty.  The research also provides an extensive analysis of fuel poverty and its relationship to vulnerability, cold homes, household characteristics and many other consumer circumstances.

Download the full report here:

Improving the Hills approach to measuring fuel poverty

Download ACE’s response to the DECC consultation here:

Fuel Poverty Consultation Response


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