Lessons from the Northern Ireland energy crisis

While predictions show that energy prices are set to remain high for at least another year, there are early lessons that companies, advice organisations, and policy makers can take to help consumers, according to the Director of Infrastructure and Sustainability at the Consumer Council, Peter McClenaghan.

The impact of the cost-of-living crisis in Northern Ireland is harrowing. As Northern Ireland’s representative consumer body, the Consumer Council works with consumers daily, hearing their concerns, and providing advice. We hear first-hand how upset, worried, and angry people are about price increases. While consumers understand the increases are due to global factors, that knowledge doesn’t make paying their bills any easier.

The demand for our front-line consumer advice and complaints service has risen by 70 per cent on pre-pandemic levels. Coupled with the increase in demand, is an increase in detriment. The magnitude of individual need and distress is clear; and is being witnessed by all our local energy suppliers, debt advice centres, and charities.

Fuel poverty

It is no surprise that the Utility Regulator estimates fuel poverty could increase to a staggering one in two households.

The Consumer Council’s Home Energy Index tracks changes in household gas, electricity and home heating oil prices in Northern Ireland. A composite index is calculated, meaning that all three energy prices are combined to create one overarching figure which uses appropriate weighting to reflect usage and market share.

In December 2021, the Consumer Council undertook research that estimated fuel poverty at 31 per cent and further research with 1,003 households in February and March 2022 that indicates fuel poverty rates are now 34 per cent.

Between December 2021, and March 2022, our Home Energy Price Index shows energy prices increased by 48 per cent and with forecasts that energy prices will remain high for some time, greater consumer support will be essential during the winter of 2022/23.

The Consumer Council’s role in the inaugural fuel bank scheme

In September 2021, anticipating a winter of high energy prices, we undertook research into the establishment of a fuel bank for Northern Ireland. Armed with this research we used our statutory position in the energy market to engage with companies to encourage them to fund the proposal to provide emergency assistance to households at imminent risk of disconnection. We also succeeded in encouraging the Department for Communities to match fund company donations ten-fold, meaning supplier donations of a quarter of a million pounds were effectively covering the administrative costs.

The scheme proved highly successful and was augmented by a further £55 million government support fund distributed to individuals on qualifying benefits.

We are proud to have played a role in the first Northern Ireland fuel bank scheme, in partnership with the Department for Communities, energy providers, and Bryson Charitable Group. On its launch the charity run fuel bank scheme received unprecedented demand. This demonstrates the urgent need to increase such financial support as the number of vulnerable households in our community continues to increase.

The benefits of regulation

Within a fortnight of the Russian invasion of Ukraine, energy prices had doubled for the two-thirds of households in Northern Ireland who use heating oil. This extreme rise demonstrates the peril of having consumers subject to global spot market prices for their essential energy needs.

The fact that the supply market for heating oil in Northern Ireland is only subject to limited self-regulation has understandably come into focus again in recent months.

The Competition and Markets Authority (CMA) recently compared Northern Ireland’s off-grid consumers to the majority of UK domestic energy users, highlighting that the former group do not benefit from standard protections including debt support, a priority services register to address consumer vulnerability, or a requirement on suppliers to provide energy efficiency advice.

The CMA also noted the lack of formalised regulations on charging, the lack of access to mandatory independent alternative dispute resolution, and the limited payment options available to heating oil consumers which is particularly important given consumers must make bulk purchases of at least £250 of heating oil at current prices. While the introduction of such protections would not insulate consumers from price increases it would improve service standards and consumer resilience.

Trust and net zero

Despite such hardship and the significant media attention on energy due to constant price increase announcements, we have seen no evidence that consumer knowledge of the sector is being enhanced. Rather, we have seen significant misunderstanding, misinformation, and growing consumer distrust in the sector.

Our research into consumer attitudes in Northern Ireland’s large, unregulated off-grid sector provides an indication of the low levels of consumer trust in suppliers operating in an unstable market.

If credible solutions are not found to address the market instability, fairness, and affordability issues emanating from this crisis, we risk a significant and wide-ranging erosion of trust in the energy sector. As our collective efforts in the pursuit of decarbonisation grows, we must not ignore the importance of trust and understanding in encouraging consumer behaviour change.

Finding solutions

Solving these problems will require significant change to our energy infrastructure and regulatory regime. In making this long term change we must redouble our efforts to place consumer’s needs; energy and technology affordability, guaranteed standards regardless of fuel source, and security of supply, at the centre of energy transition planning.

However, we will not retain consumer’s trust in the decarbonisation journey without a significant uplift in immediate financial support, energy efficiency advice to consumers, and further resourcing of the advice sector.

We are in unchartered territory so as policy makers, regulators, and industry leaders, we must coalesce around solutions that ensure the energy transition is accessible and affordable for all.

Contact Peter McClenaghan on:
T: 028902 51852
E: contact@consumercouncil.org.uk
W: www.consumercouncil.org.uk