6. Other comments from the call for evidence

6.1 The need for a review of the methodology behind the fuel poverty calculation

In their response, Energy Action Scotland called for a review of the methodology behind the fuel poverty calculation. They argue that when the metric was developed, the outlook for energy prices did not predict the volatility and price increases that have occurred. There was perhaps an underlying assumption that energy prices would be relatively flat, albeit increasing over time, and it was assumed that incomes would negate increases and energy efficiency would produce savings for households, effectively reducing fuel poverty.

In EAS’s view, these circumstances or factors necessitate at least a review of the methodology used to calculate fuel poverty in Scotland to ensure it reflects the rapid and sustained increase in energy costs and the nature of support that can be reasonably be associated with cost reduction to provide a fairer picture of fuel poverty in Scotland.

In addition, EAS discussed energy debt’s relationship to the fuel poverty calculation. They highlight that energy debt is not directly captured in the fuel poverty calculation, which means that reducing debt does not significantly change fuel poverty rates. The only point at which debt appears in the model is through the socialised debt servicing charge applied to all domestic energy consumers which then adds to the cost of energy, either through standing charges or unit costs. For consumers repaying energy debt it is likely that their fuel poverty likelihood will increase, however EAS highlighted that there is no factoring of the additional costs of repaying debt reflected in the fuel poverty definition. As such, households repaying energy debt may be underrepresented in the fuel poverty figures or have the nature of their fuel poverty underestimated.

IPPR Scotland also questioned elements of the fuel poverty calculation. They argue that the reasoning for including the 10% energy threshold in the revised fuel poverty definition was weak, and primarily served to maintain some continuity with previous definitions. They stated that the 10% threshold does not add any insight into households’ financial challenges not already captured by the MIS90 threshold. For example, a household who cannot afford a decent standard of living when they pay their energy bill at 9% of their income is still a household who cannot afford a decent standard of living.