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As U.K.'s 'fuel poverty' rates begin to soar, green policies come under fire

For many U.K. residents, winter is getting a lot colder.

In Newcastle-upon-Tyne in northeast England, 43-year-old single mother of three Gemma (she did not want to provide her last name) can barely afford her utility bills.

"I find myself not eating at all just to keep the heating on," she said. Like many who live in one of the country's millions of unimproved houses, Gemma's gas heating is metered. So is her electricity. She pays for heat and light a pound coin at a time. She receives state benefits. At one point, she was £1,000 ($1,630) in debt to her energy supplier.

"You look at your meter and think, God! It's used £4 already, it's never going to last, and think, I'm going to have to switch it off. When it's cold and my gas is running out, I put hair dryers on under a blanket, as I had some electricity on the meter." With help from a charity, National Energy Action, Gemma has been put on a repayment system and now has a reduced energy tariff.

In some areas of Stoke-on-Trent, the hub of the once-prosperous manufacturing region of the English Midlands known as "the Potteries" because of its long-cherished ceramics industry (think Wedgwood and Royal Doulton), more than half of the households live in fuel poverty. Until last month, "fuel poverty" was defined as spending more than 10 percent of household income on paying energy bills.

This may be just the beginning of an increasingly ugly political issue. The government places much of the blame for increased energy prices at the feet of so-called green policies. Currently, such policies account for only about 10 percent of the heating bill, but these numbers are set to go up dramatically. According to Department of Energy and Climate Change figures, they will add 33 percent to the cost of electricity by 2020 and 41 percent by 2030. Shutting down old coal-fired power plants and adding more expensive renewable energy -- particularly wind power -- to the grid will spur rising electricity costs.

The Shelton neighborhood on Stoke's north side has been labeled the poorest neighborhood in the country. According to DECC statistics, 278 of a total 475 households in this neighborhood -- 58.5 percent -- cannot meet their fuel bills.

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All of the Big Six U.K. energy companies (British Gas, EDF, EON, Npower, Scottish Power and SSE) announced nationwide price increases for 2014. The average hike was more than 8 percent, four times the rate of inflation. The Big Six provide energy to 52.3 million households, or 97 percent of the U.K. market. Prime Minister David Cameron has encouraged consumers to "shop around" and look to other energy providers as a solution to increased tariffs, but there aren't many cheaper alternatives.

Redefining the problem

The politics around fuel poverty has begun to warm. Last year, more than 30,000 winter deaths were thought to be caused by fuel poverty, up by a third from the previous year, according to the Office for National Statistics. Poor heating and a lack of insulation are known to increase the likelihood of strokes in the elderly and to exacerbate asthma and rheumatic disease in all age groups.

In 2011, Cameron vowed to eliminate fuel poverty by 2016. He has since waffled, promising a new date to be set at some time in the future. In the meantime, short of supplying a solution, his government has supplied a new definition.

Recently, a clause introduced in the energy bill redefined fuel poverty from a household that spent 10 percent of its income "to maintain an adequate level of warmth" -- usually defined as 68 degrees Fahrenheit -- during the day to any household that has "above average fuel costs." That is, fuel costs that leave them with "a residual income below the official poverty line."

The new definition instantly reduced the number of households across the United Kingdom classified as fuel poor from 3.2 million to 2.4 million, or from 15 percent to 11 percent. This recalculation also effectively removed any households where ratepayers simply scrimp on heat as a matter of course just to keep the bill collector at bay.

Labour Minister of Parliament for Stoke-on-Trent Joan Walley, who leads the Commons Environmental Audit Committee, said, "The government is shifting the goal posts on fuel poverty so that official statistics record far fewer households as fuel-poor."

Among his dealings intended to trim energy costs, Cameron launched a green policy rollback. He started with the energy company obligation (ECO), an energy efficiency program that requires the Big Six suppliers to provide supplemental services to low-income households. The required services include everything from footing the bill for home insulation to boiler replacements. Although energy companies have said -- unofficially -- they intend to pass the cost savings on to consumers to the tune of about £50 per year for most households, negotiations about degree of relief, and timing, are still ongoing.

Walley warned that the government's fiddling with green levies will hit fuel-poor households first. "In the longer term, green levies could actually keep bills down if they drive energy efficiency improvements that cut the cost of heating our homes," she said.

Freezing with Estonia

When it comes to energy poverty, the United Kingdom outranks 26 of the 27 E.U. member states. Estonia wields the title of energy-poorest population in Europe, at 19 percent, according to statistics provided by the Association for the Conservation of Energy.

In Germany, incentives to insulate homes and create an energy-efficient infrastructure have been a priority for policymakers.

"Here we have energy efficiency because there has been a great deal of pressure to improve housing. The houses are far more efficient than those in the U.K.," said Peter Heindl, an economist and researcher in environmental and resource economics at the Centre for European Economic Research in Mannheim. Owners of rental housing are required to insulate houses. They are allowed to pass 11 percent of their costs on to renters.

Although there are incentives to produce green energy paid directly to energy producers in the form of a fixed subsidy, €6.30 ($8.44) per kilowatt-hour, "this is in effect a transfer payment. It goes directly back to the national renewable funding scheme. The net cost of the subsidy is passed on to consumers," Heindl said.

To further complicate matters, since 2011, Germany has implemented a comprehensive energy transition program.

"The decision was taken to phase out nuclear after Fukushima," said Heindl, referring to the 2011 Fukushima Daiichi disaster in Japan. "There is no discussion of going back, at least in Germany." The United Kingdom has done the opposite, beginning with the decision last October to forge ahead on construction of the Hinkley Point C nuclear power generation plant in Somerset.

In Germany, between 10 and 12 percent of the population is considered fuel poor. Most of these are working poor, Heindl said, who fall through the gap between the clearly defined poverty line, which would qualify them for public benefits, and the many "working poor people, the less well-educated and doing less well-paid work." There is no subsidy for this demographic.

"Low wage earners are not compensated for when it comes to rising fuel costs," Heindl said. "If costs rise further, they don't expect a larger share of pie." Heindl does not think the problem will spread because benefits will eventually have to reach more households. "On the other hand, public benefits are not sufficient. Who is going to make up the difference is an open question. There is no clear answer." One thing is clear, however: In a country known for having scrupulous savers, less money is being put aside for the future.

In France, the picture is similar. About 3.8 million households -- about 8 million people, or 14 percent -- live in fuel poverty. Since 2010, France has launched a countrywide program called "Habiter Mieux" (better living) aimed at improving the thermal efficiency of fuel-poor households by at least 25 percent.

The plan, administered by local councils, may only be a stopgap measure. The symptoms of fuel poverty are progressing. According to a 2012 report by the French national energy ombudsman, the economic crisis and the recent energy price increases (25 percent for gas and 8 percent for electricity in the past two years) place increasing numbers of vulnerable households at risk of not being able to pay their energy bills. The number of referrals for payment arrears increased by 15 percent in 2011. These households carry an average energy debt of €1,900.

Cameron's suggested solution to the United Kingdom's own fuel cost problem was simple: His aide tweeted that the prime minister's advice was to follow Energy Secretary Ed Davey's example and beat the cold by wrapping up warm and wearing sweaters inside.

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