Is the EU doing enough?

In the following post, Harriet Thomson provides an introductory discussion of European fuel poverty policy, and asks readers to consider whether a European-wide definition of fuel poverty is possible. 

Following on from a successful Fuel Poverty Awareness Day in the UK and Spain, with plenty of activity on Twitter (see https://twitter.com/search?q=%23FPAD), a brief discussion of European level policy relating to fuel poverty might be helpful in identifying what needs to happen next in order to create an integrated policy framework for tackling fuel poverty across the EU.

European Council Directives

Policy specifically addressing fuel poverty on a European level has been limited; however, there have been several European Council Directives that contain measures that have the potential to alleviate some aspects of fuel poverty, particularly in relation to consumer protection within the energy markets.  Table 1 presents the author’s summary of these directives.

Directive Name Relevant fuel poverty elements
European Council Directive 2002/91/EC on the energy performance of buildings – Sets minimum requirements of energy performance in new buildings and major renovations and introduces Energy Performance Certificates.

 

European Council Directive 2003/54/EC concerning common rules for the internal market in electricity – Requires Member States to “ensure that there are adequate safeguards to protect vulnerable customers, including measures to help them avoid disconnection” (p42).- Also requires transparency of contract, dispute settlement mechanisms and the ability of consumers to switch supplier.

 

European Council Directive 2003/55/EC concerning common rules for the internal market in natural gas – Requires Member States to “ensure that there are adequate safeguards to protect vulnerable customers, including appropriate measures to help them avoid disconnection” (p62).- Also requires transparency of contract, dispute settlement mechanisms and the ability of consumers to switch supplier.

 

European Council Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market – Outlaws unfair commercial practices including within the energy sector, such as misleading and aggressive practice.- Vulnerable consumers are protected at a higher level, such as children and disabled people.

 

European Council Directive 2005/32/EC establishing a framework for the setting of ecodesign requirements for energy-using products – Increases energy savings from energy using products (EUPs) such as boilers, fridges, and televisions, and requires labelling displaying the product’s energy efficiency.

 

European Council Directive 2009/72/EC concerning common rules for the internal market in electricity – Recognises energy poverty is a growing problem and requires affected Member States to develop national action plans or frameworks.Requires Member States to “define a concept of vulnerable customers which may refer to energy poverty and, inter alia, to the prohibition of disconnection of such customers in critical times” (p65).- Customers must have the right to choose their supplier and to change supplier within 3 weeks.- All customers must have access to accurate consumption data.- Mandates Member States to create an independent energy body to manage complaints.- Requires all household customers to have access to an electricity supply.

 

European Council Directive 2009/73/EC concerning common rules for the internal market in natural gas – Recognises energy poverty is a growing problem and requires affected Member States to develop national action plans or frameworks.-Requires Member States to “define the concept of vulnerable customers which may refer to energy poverty and, inter alia, to the prohibition of disconnection of gas to such customers in critical times” (p103).- Customers must have the right to choose their supplier and to change supplier within 3 weeks.- All customers must have access to accurate consumption data.

– Mandates Member States to create an independent energy body to manage complaints.- Requires all household customers to have access to a gas supply.

Table 1: Author’s summary of the relevant European Council Directives

As can be seen in the author’s summary in Table 1, it clear that over the last decade, consumer protection in the energy market across Europe has been vastly improved, with a requirement for all consumers to receive an electricity and gas supply of a specified quality, accurate and timely consumption data, and a contract that specifies all the terms of service. In addition, consumers should be able to switch suppliers within three weeks, use an independent energy body to investigate complaints, and are protected from the worst consumer practices such as aggressive and misleading sales techniques.

The directives can be broadly categorised as either addressing consumer protection or energy use awareness. In terms of energy use awareness, European Council Directives 2002/91/EC on the energy performance of buildings and 2005/32/EC establishing an ‘ecodesign’ framework both aim to make consumers more aware of energy consumption, the former targeting buildings, and the latter targeting energy-using products. Whilst these Directives do not directly alleviate fuel poverty, an improved future housing stock will benefit future generations, whilst the benefits of drawing awareness to the energy consumption levels of electrical appliances cannot be underestimated; an analysis of five eco-labelling programs in America found that there are various factors for success, but “a properly designed labeling program can be a significant stimulus for market transformation toward environmentally preferable products” (Banerjee and Solomon, 2003: 120). However, some authors are critical of directives related to traded goods; Boardman for example states that these policies are only likely to benefit better-off households as poorer households tend to purchase second-hand equipment (Boardman, 2010: 191).

European Council Directives 2003/54/EC and 2003/55/EC concerning common rules for electricity and gas, 2005/29/EC concerning unfair business-to-consumer practice and Directives 2009/72/EC and 2009/73/EC concerning common rules for electricity and gas, all contain measures to enhance consumer protection. However, there are weaknesses to the directives. European Council Directives 2009/72/EC and 2009/73/EC both acknowledge energy poverty exists and require affected Member States to develop action plans, however, no definition of energy poverty is provided, and likewise, no criteria for an ‘affected Member State’ is given. Similarly, in these directives, Member States are required to define a vulnerable customer possibly in relation to energy poverty, but no guidance is provided on who is likely to be a vulnerable customer, and it is likely that definitions of vulnerable consumers are varied, or non-existent, across the EU.

Looking beyond consumer protection and energy use awareness, the European Council Directives 2003/54/EC and 2003/55/EC also contained measures to open up the internal markets in electricity and natural gas, transferring ownership from the state to the private sector. A liberalised energy market was believed to “achieve efficiency gains, competitive prices and higher standards of service” (European Council Directive 2009/72/EC: 55), however, some authors have questioned the impact of energy market liberalisation, with Poggi and Florio stating that households are potentially discriminated against during energy sector reforms, particularly when tariff adjustments occur with companies shifting “away from cross-subsidies to the low users” (Poggi and Florio, 2010: 254). In their study of social affordability of energy bills across ten European countries, Poggi and Florio found that steps towards a liberalised energy market, such as reducing public ownership in the gas sector, were “correlated with higher probability of experiencing deprivation” (2010: 261).

Is the EU doing enough? What should be done to address fuel poverty?

From the brief summary of European Council Directives, it is clear that there have been discussions of fuel poverty at an EU level; however, it is also clear that the current piecemeal policy framework is not fit for the purpose of eradicating fuel poverty.

The European Economic and Social Committee (EESC), a consultative body of the EU, issued an opinion piece regarding energy poverty which states energy poverty “is a new social priority that needs to be tackled at all tiers of government and the EU should provide common guidelines to ensure that all Member States adopt the same approach” (EESC, 2011: 53). The committee also suggests the EU “adopt a common general definition of energy poverty that can be then be adapted by each Member State” (2011: 53). The adoption of a common definition is a recommendation shared by many, with the European Fuel Poverty and Energy Efficiency project (EPEE) recommending “a common definition, a legislative framework, a consistent diagnosis, a fuel poverty special interest group” (EPEE, 2009: 10).  However, how practicable is a European wide definition? What would such a definition encompass? Thoughts below please!

Bibliography:

Banerjee, A. and Solomon, B. (2003) Eco-labeling for energy efficiency and sustainability: a meta-evaluation of US programs. Energy Policy, 31: 109-123.

Boardman, B. (2010) Fixing Fuel Poverty: Challenges and Solutions. Earthscan, London.

Council Directive 2002/91/EC of 16December 2002 on the energy performance of buildings.

Council Directive 2003/54/EC of 26 June 2003 concerning common rules for internal market in electricity and repealing Directive 96/92/EC.

Council Directive 2003/55/EC of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC.

Council Directive 2005/29/EC of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC.

Council Directive 2005/32/EC of 6 July 2005 establishing a framework for the setting of ecodesign requirements for energy-using products and amending Council Directive 92/42/EEC and Directives 96/57/EC and 2000/55/EC.

Council Directive 2006/32/EC of 5 April 2006 on energy end-use efficiency and energy services and repealing Council Directive 93/76/EEC.

Council Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC.

Council Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC.

EPEE, (2009) Tackling Fuel Poverty in Europe: Recommendations Guide for Policy Makers. http://www.fuel-poverty.com/files/WP5_D15_EN.pdf (Accessed 11th October 2010)

European Commission (2010a) Europe 2020: A strategy for smart, sustainable and inclusive growth. COM. 3 March 2010. Luxembourg, Office for Official Publications of the European Communities.

European Commission (2010b) Commission Staff Working Paper: an Energy Policy for Consumers. Luxembourg, Office for Official Publications of the European Communities.

European Economic and Social Committee (2011) Opinion of the European Economic and Social Committee on ‘Energy poverty in the context of liberalisation and the economic crisis’ (exploratory opinion).  Official Journal of the European Union, C 44/53 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2011:044:0053:0056:EN:PDF (accessed 27th February 2011)

Poggi, A., and Florio, M. (2010) Energy deprivation dynamics and regulatory reforms in Europe: Evidence from household panel data. Energy Policy, 38 (1), 253-264.

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