The cost of living

[IvanV]

So it does seem like per capita energy consumption is highest for people that have most money, which suggests to me that the most effective, as well as fairest, way to effect rationing would be to get rich people to use less fuel, not price poor people into unpleasant and potentially dangerous conditions. I posit that progressive pricing would work quite effectively in the manner intended.

Whilst it is true on average that per capita energy consumption is higher for people with more money, unfortunately the variation around the mean is large. More precisely, the variation of energy bills within social groups is large in comparison to the difference in the average energy bills of different social groups. So you only get rather weak targeting by income if you use energy consumption as a proxy.

A study that shows this in gory detail is, for example, Study on distributional impacts of time of use tariffs.

[Bird on a Fire]

So it does seem like per capita energy consumption is highest for people that have most money, which suggests to me that the most effective, as well as fairest, way to effect rationing would be to get rich people to use less fuel, not price poor people into unpleasant and potentially dangerous conditions. I posit that progressive pricing would work quite effectively in the manner intended.

Whilst it is true on average that per capita energy consumption is higher for people with more money, unfortunately the variation around the mean is large. More precisely, the variation of energy bills within social groups is large in comparison to the difference in the average energy bills of different social groups. So you only get rather weak targeting by income if you use energy consumption as a proxy.

A study that shows this in gory detail is, for example, Study on distributional impacts of time of use tariffs.

The point isn't to target income using energy as a proxy. There are already taxes on income.

The point is to target excessive consumption, above the minimum needed to keep a house at an acceptable temperature, cook, store food and wash stuff.

I can't find a plot of consumption by income (rather than effect on bills from changing tariff) in that report. But for instance, if you target energy consumption over the 75%ile, how many households under the 25%ile of income would be affected? I suspect very few.

Extra targeted help might still be needed for houses with lots of zero-income people like kids, of course, but that could be with fungible money rather than finicky tariffs.

[headshot]

A friend of mine, who lives in a reasonably large detached house with his wife and son, has just told me that Octopus Energy have been in touch to tell him that his predicted monthly energy bill from November will be £907.

That's insane.

Meanwhile, Frau HS and I are still on our fixed tariff with Octopus until May 2023 and are paying £91 a month and have £200 in credit.

[discovolante]

Turning housing stock into minimal source of energy use is an infrastructure investment problem. Domestic energy use is second only to transport in the UK by sector. Seeing as it's a matter of national concern that people can (a) live in warm homes, and (b) lower their dependency on gas, there needs to be government investment to do the following:

• Compel all landlords to undertake insulation installation and lower energy use, contributing money
• Compel (not merely incentivise) households to electrify their heating and install solar & wind power where possible by 2030, covering 75-90% of the cost.
• For single-skin homes with poor heat performance, compel (not incentivise) wall insulation installation where possible
• Similarly, install decent loft insulation in all possible homes
• "Where possible" should be determined by experts, not property owners
• As a prelude to banning new ICE cars by 2030, all new cars must be expected to be hybrid (to cut out idling and force regenerative braking) by 2024.
• All new homes built to passivhaus standards, with solar, wind and air-source heat pumps. If built in communities, install ground source heat instead.

Seeing homes as an Englishman's castle, rather than a drain on scarce resources, is part of the problem here. Individualism will be as large a failure with this as in so many other areas of economics.

The Government has the power both to raise the capital funds required and force the installation of this stuff. It should use it.

With regard to compelling landlords in the PRS, I dunno if that would be quicker in the long run than some very hefty tax breaks to begin with. Unless you have a licensed HMO I'm not sure there is any easy way of keeping track of who has done it and it would be easy for a lot to ignore. So I think you would need to make landlords better off as a result of doing it and not just in the same position that you were before. Maybe you could do both I suppose and just offer a grant to do it plus some extra cash on top.

[IvanV]

I can't find a plot of consumption by income (rather than effect on bills from changing tariff) in that report. But for instance, if you target energy consumption over the 75%ile, how many households under the 25%ile of income would be affected? I suspect very few.

It's not exactly what you are looking for, but Fig 2.2 gives peak consumption by social group. A small number of social groups have consumption very different from some others. But mostly the overlap far exceeds any difference in the mean.

Unfortunately the practical reality of anonymisation in using secondhand data from socio-economic studies is you rarely get access to individual-level details like income. And I believe the detailed data from these specific metering trials was accidentally destroyed.

[Bird on a Fire]

I can't find a plot of consumption by income (rather than effect on bills from changing tariff) in that report. But for instance, if you target energy consumption over the 75%ile, how many households under the 25%ile of income would be affected? I suspect very few.

It's not exactly what you are looking for, but Fig 2.2 gives peak consumption by social group. A small number of social groups have consumption very different from some others. But mostly the overlap far exceeds any difference in the mean.

Unfortunately the practical reality of anonymisation in using secondhand data from socio-economic studies is you rarely get access to individual-level details like income. And I believe the detailed data from these specific metering trials was accidentally destroyed.

Ok cheers. It certainly looks like a threshold set at 75% of "lavish lifestyles" would exclude about 90% of people in the vulnerable groups. I'd be reasonably happy with that, especially alongside other uplift measures. Pensiones get a fuel allowance, for instance.

And note that that's only peak time consumption, when most people use energy. I bet off-peak usage skews to the better-off as well.

[lpm]

A friend of mine, who lives in a reasonably large detached house with his wife and son, has just told me that Octopus Energy have been in touch to tell him that his predicted monthly energy bill from November will be £907.

That's insane.

It's not insane. It's criminal. These people are committing crimes against our planet.

I'm glad these fossil fuel burning scum are being heavily penalised. They should be penalised more. Double their bill to £1,800. Then maybe they'd try a bit of insulation.

[lpm]

To do the maths (exact figures differ very slightly by region):

April 2022 price cap:

Electricity: 45p per day standing charge + 28.3p per kWh
Gas: 27p per day + 7.4p per KWh

October 2022 price cap prediction (per Cornwall Insight):

Electricity: 46p per day standing charge + 52.1p per kWh
Gas: 28p per day + 14.8p per KWh

To get to £907 they must be burning something like 725 kWh of electricity per month and 3,500 kWh of gas a month. That is obscene. It is over three times the UK average.

[lpm]

I'm struggling to add up enough appliances to burn that much fossil fuels, even with a large detached house. They must have an Aga on all year, plus a couple of EVs, plus a hot tub, but there must be other stuff I can't think of. Is it a listed house with Elizabethan windows? Did a pig build it out of straw to keep a wolf out?

[IvanV]

A friend of mine, who lives in a reasonably large detached house with his wife and son, has just told me that Octopus Energy have been in touch to tell him that his predicted monthly energy bill from November will be £907.

That's insane.

It's not insane. It's criminal. These people are committing crimes against our planet.

I'm glad these fossil fuel burning scum are being heavily penalised. They should be penalised more. Double their bill to £1,800. Then maybe they'd try a bit of insulation.

Does that mean average over the year, or just for the winter months? I expect to consume about 3,500 kWh of gas in each of the coldest two winter months. Still doesn't get me anywhere near £900 as my electricity consumption is only about 250 kWh.

[Stephanie]

This has prompted me to have a look at our usage. In July we used 169kWh of electricity and 165kWh of gas. By comparison, gas for December 2021 was 637kWh. Electricity didn't vary much, was 204kWh.

ETA: 2 bed standard terrace

[Bird on a Fire]

I thought it was quite well known that energy companies' "predicted bills" are basically b.llsh.t? There have been loads of reports on twitter of companies putting people's direct debits up way beyond the value of the energy they actually use. It's pretty low-risk for them - worst-case scenario the customer notices and they only get to charge the money they were actually entitled to in the first place, but best-case is they can fleece hundreds of pounds of extra capital off of thousands of customers and hang on to it over winter.

[Stephanie]

I thought it was quite well known that energy companies' "predicted bills" are basically b.llsh.t? There have been loads of reports on twitter of companies putting people's direct debits up way beyond the value of the energy they actually use. It's pretty low-risk for them - worst-case scenario the customer notices and they only get to charge the money they were actually entitled to in the first place, but best-case is they can fleece hundreds of pounds of extra capital off of thousands of customers and hang on to it over winter.

Yeah, I had seen some shocking examples on Twitter tbf

[Bird on a Fire]

In July we used 118 kWh. That's our highest month, because it gets so hot we usually have a fan running. Costs 0,157€/kWh. We get a low-income discount so our last monthly bill was 16,13€. ETA forgot to mention the standing charge of 0,33€ per day. The discount is 50% off standing charge, but only ~28% off actual consumption, which seems a better way to do it (ie not subsiding consumption too much).

Gas for hot water comes in 13 kg butane canisters which get delivered to our doorstep for about 32€. We get through one every few months. Probably goes a bit quicker in winter because it takes a bit longer to heat up, but I don't keep track. Apparently that's about 178 kWh per canister so 0,18€/kWh - much more expensive than the UK, but then we only need it for 10-20 mins a day.

[Bird on a Fire]

I thought it was quite well known that energy companies' "predicted bills" are basically b.llsh.t? There have been loads of reports on twitter of companies putting people's direct debits up way beyond the value of the energy they actually use. It's pretty low-risk for them - worst-case scenario the customer notices and they only get to charge the money they were actually entitled to in the first place, but best-case is they can fleece hundreds of pounds of extra capital off of thousands of customers and hang on to it over winter.

Yeah, I had seen some shocking examples on Twitter tbf

They tried to do it to my mum but she told them to f.ck off

[IvanV]

I thought it was quite well known that energy companies' "predicted bills" are basically b.llsh.t? There have been loads of reports on twitter of companies putting people's direct debits up way beyond the value of the energy they actually use. It's pretty low-risk for them - worst-case scenario the customer notices and they only get to charge the money they were actually entitled to in the first place, but best-case is they can fleece hundreds of pounds of extra capital off of thousands of customers and hang on to it over winter.

In general. But I have found Octopus used reasonable numbers with me after my first year with them. Or maybe that's because I argued with them when I first switched to them.

[discovolante]

Thanks for the invitation to give lots of anecdotes lpm :p

I rent a house built in the early 19th century with heating and hot water fuelled by an oil tank in the garden. The house is single glazed with wooden sash windows. It was apparently jnsulated as much as possible before we moved in but it still doesn't retain heat very well. Not much I can do about that apart from reduce usage and thank the lord I will be able to afford to top up the tank later in the year even though I'm sure I will be feeling quite unhappy as I read out my card details. As for electricity I'm with Octopus who are supposedly renewable and again that's about as close as I can get to minimising fossil fuel usage.

[Bird on a Fire]

Thanks for the invitation to give lots of anecdotes lpm :p

I rent a house built in the early 19th century with heating and hot water fuelled by an oil tank in the garden. The house is single glazed with wooden sash windows. It was apparently jnsulated as much as possible before we moved in but it still doesn't retain heat very well. Not much I can do about that apart from reduce usage and thank the lord I will be able to afford to top up the tank later in the year even though I'm sure I will be feeling quite unhappy as I read out my card details. As for electricity I'm with Octopus who are supposedly renewable and again that's about as close as I can get to minimising fossil fuel usage.

Surely you can convert it to run on waste oil from your local deep-fried mars bar eatery?

[Bird on a Fire]

The two places I've lived with icy windows were HMOs when I was a student.

One of them we did actually heat, but there was no radiator in my boxroom. I borrowed an extra blanket from a friend and slept with lots of clothes on. I was pretty ill with depression that year so wasn't getting out of bed much anyway, other than for a daily slice of toast and a wee. Can't blame the temperature for that, though.

The other place had had an ensuite knocked through to make a bigger bedroom, but they hadn't finished, and the shower pipe was open to the outside. Duct-taped some cardboard over it. Normally by the end of the months I didn't have enough money left in my account to do the minimum £10 top-up at the corner shop, so there'd be the odd week with no heat. My housemates were feckless tw.ts who never paid any bills (I ended paying all the internet myself, so was disinclined to spend even more of my loan propping them up.) Spent a lot of time in the library that year.

[headshot]

I'm struggling to add up enough appliances to burn that much fossil fuels, even with a large detached house. They must have an Aga on all year, plus a couple of EVs, plus a hot tub, but there must be other stuff I can't think of. Is it a listed house with Elizabethan windows? Did a pig build it out of straw to keep a wolf out?

Nope. Modern house <20 years old with all the mod-cons and regular usage. They have a Tesla, but tend to only charge it at Tesla chargers on the network.

Their bill was "£135 last year, then it went up to £190, and now it's on £260".

So this is Octopus trying it on methinks.

[lpm]

I don't believe trying it on is a thing any more.

The energy suppliers are required to provide full detail. The bill shows exact prices per kWh, the standing charge, any conversion from gas meter reading to kWh, the quantity used in the past month, the quantity used in the month a year previously, all the £ costs for the month. And they are required to show estimated annual usage.

My guess is the friend is a bullshitter. If the bill's currently £260 a month it will be going up to about £500 a month. People lie.

[lpm]

This has prompted me to have a look at our usage. In July we used 169kWh of electricity and 165kWh of gas. By comparison, gas for December 2021 was 637kWh. Electricity didn't vary much, was 204kWh.

ETA: 2 bed standard terrace

It's easy enough to plug the figures into the prices I gave (assuming you are on a typical variable direct debit tariff). Call it 2,238 kWh of electricity and 4,812 kWh of gas per annum (averaging Dec and July) gives a monthly cost of £104 at current rates, rising to £179 a month under the predicted Oct price cap.

Although winter 2021-22 was pretty mild, it'll be worse under a beast-from-the-east sort of a year.

[bjn]

In terms of effective, politically possible solutions. What would be the big downsides of my suggestion of progressive energy pricing?

Obviously choosing an appropriate threshold could be tricksy, but beyond that.

Two issues. In practice there very likely just isn't time to change the energy companies' billing systems. We've got about ten to twelve weeks until the first frosts in English cities, and temperatures that would cause hypothermia much sooner.

Secondly, the thresholds would be very difficult. A sensible threshold for new built one bed flat occupied by one person would be very different to the sensible threshold for a family of five renting an four bedroom house built before modern insulation standards. A single threshold per energy bill risks giving the single person very cheap energy and no incentive to be frugal, or driving the family bankrupt.

A solution might be to assess each household and give them different thresholds based upon need. But as with explicit rationing, the problem is that the UK government doesn't know how many people there are and where they live. I don't see how that information on each household could be collected over the next ten to twelve weeks.

How perfect does the system need to be to be useful?

[headshot]

I don't believe trying it on is a thing any more.

Hah. Good one.

[Woodchopper]

In terms of effective, politically possible solutions. What would be the big downsides of my suggestion of progressive energy pricing?

Obviously choosing an appropriate threshold could be tricksy, but beyond that.

Two issues. In practice there very likely just isn't time to change the energy companies' billing systems. We've got about ten to twelve weeks until the first frosts in English cities, and temperatures that would cause hypothermia much sooner.

Secondly, the thresholds would be very difficult. A sensible threshold for new built one bed flat occupied by one person would be very different to the sensible threshold for a family of five renting an four bedroom house built before modern insulation standards. A single threshold per energy bill risks giving the single person very cheap energy and no incentive to be frugal, or driving the family bankrupt.

A solution might be to assess each household and give them different thresholds based upon need. But as with explicit rationing, the problem is that the UK government doesn't know how many people there are and where they live. I don't see how that information on each household could be collected over the next ten to twelve weeks.

How perfect does the system need to be to be useful?

I think that the minimum criteria is that it shouldn’t make the situation significantly worse, either by providing an incentive for millions of people to use more energy, or that the system raises prices for millions of people to the extent that they can’t afford the energy needed for normal every day life.