Members' Research Service By / September 8, 2016

Energy poverty: Protecting vulnerable consumers [Policy Podcast]

Written by Nikolina Sajn, Between 50 million and 125 million people in the EU are at risk of energy poverty…

© ronstik / Fotolia

Written by Nikolina Sajn,

Energy poverty: socks
© ronstik / Fotolia

Between 50 million and 125 million people in the EU are at risk of energy poverty – unable to keep their homes warm or pay their bills. Many cope by spending less on food, heating only some rooms in their homes or during only parts of the day, wearing multiple layers of clothes inside and even using their TV sets as a source of light. The consequences of living in cold homes are numerous, leading to an excess number of winter deaths, respiratory problems, increased hospitalisations, greater incidences of mental diseases, as well as negative effects on social life, relationships and education of children.

Listen to podcast: Energy poverty: Protecting vulnerable consumers [Policy Podcast]

While there is a consensus that underlying causes of energy poverty are low incomes, high energy prices and poor energy efficiency of the living space (with market conditions and social environment also playing a role), defining energy poverty for policy purposes is not easy. The 2009 Electricity and Gas Directives – the principal pieces of legislation dealing with this issue at EU level – do not include a common definition of energy poverty. But the Commission’s 2010 Staff Working Document on ‘An Energy Policy for Consumers’ suggests it could be defined as households that have difficulties in paying their energy bills or households spending too much – possibly twice as much as the average – on energy products. But this type of definition can be problematic, as energy-poor households tend to spend less on energy than necessary to keep the home warm and may be spending less than the threshold, but still live in cold homes. Some experts therefore argue that a definition of energy poverty should take into account the necessary instead actual energy consumption, but this issue is far from settled.

In the context of existing EU legislation, energy poverty refers only to access to electricity and gas, and not to other types of energy such as district heating, coal or heating fuel. The Electricity and Gas Directives require Member States to define vulnerable customers in their energy market and protect them. Member States use various measures to fight energy poverty, including payments through their general social systems, social energy tariffs, limitations on disconnection due to non-payment, improvements in energy efficiency, better information and better consumer protection. However, a 2015 study conducted for the European Parliament concluded that the Member States have found it difficult to define energy poverty in a way that can easily be measured or acted upon, so most of the funds are currently not being well spent.

Moreover, a number of studies warn that, without robust energy efficiency measures, EU energy and climate policy could increase the risk of energy poverty, primarily due to the costs of financing the transition to renewable energies through utility bills. The Parliament has warned about this danger and has recently asked the Commission and the Member States to introduce a winter heating disconnection moratorium, as well as no interest credits for energy efficiency improvements and renewable energy investments for low income households.

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