Academic journal article Australian Journal of Social Issues

A New Form of Energy Poverty Is the Hallmark of Liberalised Electricity Sectors

Academic journal article Australian Journal of Social Issues

A New Form of Energy Poverty Is the Hallmark of Liberalised Electricity Sectors

Article excerpt

Introduction

Electricity sectors around the world have undergone major structural change over the last 20 years. Large monopolies have been 'broken up' into smaller companies. Some of these new companies have been privatised. Markets have been created for the wholesale trading of electricity, and many households can choose which company they want to supply their electricity.. New regulatory institutions have also been created (Chester 2007). These structural changes have spawned an escalation of household electricity, prices at rates well above inflation and income growth.

Electricity is a common energy source for household uses such as cooking, lighting and heating. Steep increases in electricity, prices will cause hardship unless households have adequate income or the capacity, to reduce energy demand. A household in the United Kingdom with an estimated need to spend more than 10 per cent of income on heating and other energy essentials is deemed to be in 'fuel poverty-'. The United Kingdom recognised this as a distinct social problem in the 1990s (Hills 2012). More recently the European Commission (EC) and International Energy Agency (IEA) have acknowledged the existence of a more widespread problem (Heffner et al. 2011).

This article explores the prevalence of rising energy costs, and the consequences for poor households in Australia and elsewhere. The discussion commences with an overview of global electricity sector restructuring and the subsequent rise in household electricity prices. Our conceptualisation of energy poverty is then discussed and distinguished from its traditional use as a relative measure referring to the lack of energy services to meet basic human needs in developing countries. We posit that the term 'energy poverty.', rather than the concept of 'fuel poverty.' used in the United Kingdom, is more appropriate because it captures the contemporary multiple household uses of energy other than for heating. Low-income households are the most vulnerable to energy poverty, as greater proportions of income are increasingly required to pay energy bills. This, we argue, is leading to deprivation and social exclusion. Acutely aware of the limitations of an absolute arbitrary measure, we use a similar threshold to that of the United Kingdom and define energy poverty as occurring when low-income households spend 10 per cent or more of disposable income on household energy bills.

The article's focus then moves to the prevalence of the 'new' energy poverty across the Northern Hemisphere, New Zealand and Australia. A widespread incidence is found internationally and we posit there is a real and growing problem for Australia's 3.5 million lower-income households. Early findings from our current research strongly indicate that Australian energy poverty is not confined to the poorest households who are highly dependent on income support but is spreading into the second lowest income quintile. Less than 30 per cent of households in the second lowest quintile depend on income support; instead they are much more reliant on wages and other income sources (ABS 2011b). The impacts and consequences of higher energy bills for those on low incomes are then discussed, followed by an overview of policies available to the energy-poor. We suggest that current policies are generally ineffective forms of temporary relief that further embed the problem. A final section draws together our key arguments.

The 'liberalisation' of electricity sectors and the Australian exemplar

By the 1980s, in line with the growing ascendancy of neoliberalism, a new paradigm for the provision of utilities, and particularly the production and supply of electricity, asserted the need for greater competition and less government involvement. Benefits were claimed to include lower prices for all consumers, more efficient operations through lower costs, the elimination of cross-subsidies and far more productive investment (Newbery 2002a; Joskow 2003). …

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