Delivering affordable warmth in rural Scotland: action plan

Chapter 1 - The rural dimensions to fuel poverty

There are a number of distinctively rural dimensions to fuel poverty and there are also other dimensions which affect both urban and rural Scotland but which impact disproportionately on the lives of people living in rural and remote areas of Scotland. They are as follow:

1.1 Basic 'rurality'

Rural and remote Scotland has a population of 1 million and is characterised by a multiplicity of small, scattered and often hard to reach communities, which bring additional policy, service delivery, cost and funding challenges.

Links: Urban rural classification map (Map of rural Scotland, page 7)

SRUC Rural Scotland in Focus 2014 report (esp. Chapter 3, Rural Poverty and Disadvantage: Falling between the Cracks)

Rural Scotland Key Facts 2015 (Table 14, page 31 - how adults usually travel to work / education by geographic area)

Fuel Poverty Evidence Review (Para. 3.4, page 60 - rurality)

1.2 Disposable income levels

10% to 40% higher rural incomes are required to achieve the UK average 'Minimum Income Standard' level. The additional costs come from a range of sources, in particular travel costs, paying for goods and their delivery and heating one's home.

Links: A Minimum Income Standard for Remote Rural Scotland 2012

Rural Scotland Key Facts 2015 (Figure 11, page 35 - total expenditure on fuel of cars per month by geographic area )

1.3 Fuel poverty and extreme fuel poverty levels

Fuel poverty levels are significantly higher in rural Scotland than in the rest of Scotland. Over half of all rural and remote households live in fuel poverty. Nearly two-thirds of the remote households live in fuel poverty, including 23% who live in extreme fuel poverty that is they need to spend over 20% of their incomes to keep their homes warm and meet their other home energy requirements.

Links: Fuel Poverty Map of Scotland

Rural Scotland Key Facts 2015 (Table 15, page 46 - fuel poverty by geographic area)

Scottish Government's House Condition Survey and Research Team August 2012 Fuel Poverty Evidence Review (Section 3.4, page 60)

Fuel Poverty report 2014 (Western Isles) (highlights 71% of households in fuel poverty and 18% in extreme fuel poverty against a Scottish average of 35% - based on a response from 2,167 of 12,000 permanently occupied household who received the questionnaire.)

Estimates of heat use in the United Kingdom in 2013 (Table 2, page 96)

Maps of gas network and fuel poverty (see Appendix 3, statistics, page 9 and 10)

1.4 Weather effects

Greater exposure to cold, wind and driven rain makes houses more prone to rapid heat loss and serious fabric defects.

Links: Rural Scotland Key Facts 2015 (Fig 16, page 47 - presence of condensation, damp and urgent disrepair by geographic area)

See map in appendix 2

1.5 Hard to heat house types

Proportionately many more, older, detached and often bigger houses, in poor condition and with hard-to-treat features like solid walls, attic roofs and extensions.

Links: Rural Scotland Key Facts 2015 (Table 22, page 45 - EPC rating by geographic area)

Rural Scotland Key Facts 2015 (Fig.13, page 41 - property type by geographic area)

1.6 Supply chain issues

The location of remedy providers is often distant from the remote rural market that needs the greatest support. Additionally, skilled local service providers and workforces are often put off bidding for fuel poverty remediation contracts because of their short-term nature and the accreditation demands required to meet both industry and funders' quality standards.

Links: See Appendix 3, papers for meeting 3, 20 October 2015

Supply chain analysis of remote rural and island areas (A report by Changeworks for the Energy Saving Trust, 2015)

1.7 Housing tenure characteristics

There is proportionately much less social housing and much more owner-occupied and privately rented housing, which tends to be older and in poorer condition.

Links: SHCS Local Authority Tables 2014

Rural Scotland Key Facts 2015 (Fig. 14, page 43 - housing tenure by geographic area)

A much lower percentage of properties in rural Scotland rent from Local Authorities and Housing Associations / Co-ops (14% in rural against 25% for the rest of Scotland).

1.8 Demographic context

Most rural and remote communities have significantly higher proportions of older people than average, especially pensioners living alone who are often vulnerable, living in older properties and in fuel poverty or extreme fuel poverty.

Links: SHCS Local Authority Tables 2014 (See Under-occupied tab)

Rural Scotland in Focus 2014 (Fig. 13, page 85)

Rural Scotland Key Facts 2015 (Fig.2, page 10 - age distribution of population by geographic area and Table 4, page 13 - household type by geographic area)

Scottish Government's House Condition Survey and Research Team August 2012 Fuel Poverty Evidence Review (Section 3.4, page 60)

1.9 Limited mains gas coverage

Mains gas not only provides the cheapest source of energy to heat homes but also gives consumers unique access to additional 'dual fuel' discounts on their combined gas and electricity bills. However, whilst the great majority (94%) of urban households are on the gas grid, fewer than half (41%) of all rural households have access to it - and most remote rural communities remain off-gas.

Links: Areas and types of properties off the gas grid (See Fig. 1, page 70)

Ofgem Insights paper on households with electric and other non gas heating (Fig, 7, page 25)

Scottish House Condition Survey (see page 17, Table 4)

SHCS Local Authority Tables 2014 (Gas grid tab)

Energy in Scotland 2016 (Figures 7.11 and 7.12, page 138 and 139)

1.10 Reliance on alternative heating fuels

As a result, most rural and remote rural households must rely on alternative and significantly more expensive fuels to provide the warmth and hot water they need for their homes, in particular electricity, which costs three times more per average unit than mains gas, as well as domestic oil, LPG, coal and wood products.

Links: Energy in Scotland 2016 (Tables 7.2 and 7.3, page 132)

1.11 Higher electricity consumption levels

Domestic electricity consumption is, therefore, significantly higher in rural and remote local authority areas than in predominantly urban ones where average usage is around 4,000 kW hours per year. In predominantly rural areas, like the Borders and Dumfries & Galloway, average consumption is around 5,000 kW hours a year and in Argyll & Bute, the Western Isles, Orkney and Shetland averages are between 7,000 and 10,000 kW hours a year.

Links: Energy in Scotland 2016 (Fig. 7.6, page 136 - average annual household consumption of electricity by LA area)

See Appendix 3, Papers for meeting 2, 22 September 2015

1.12 "Regional" differences in network charges (electricity)

Even after the application of the UK Government's Hydro Benefit Replacement Scheme ( HBRS), which is meant to protect consumers from the much higher than average costs associated with distributing electricity in the extensive North of Scotland 'region', most northern consumers are still being charged significantly more (0.9p per unit) for network charges than most of their southern counterparts. This has a serious knock-on effect on the bills for all in the north and particularly for those in rural and island homes in the North with high consumption levels. (See also 1.11 and 1.15)

Links: Ofgem's October 2015 ' Regional differences in network charges' paper, especially p 21 and Appendix 1 and ' Hydro Benefit Replacement Scheme and Common Tariff Obligation' July 2016, page 4,

1.13 UK Government policy charges (electricity)

Similarly, customers who rely on electric heating (predominantly those living in off-gas rural areas) also pay more heavily than mains gas users for the costs of the UK Government's social and environmental policies which are included in their bills. Moreover, off-gas electricity users are set to pay steadily more (around 2% by 2020) for them year on year whilst gas users will pay steadily less.

Links: Ofgem Insights paper on households with electric and other non-gas heating (See paras 5.13 to 5.16, pages 54 & 55)

1.14 Restricted Time of Use tariffs and meters (electricity)

Electric heating in rural communities is likely to be supplied on restricted Time of Use (ToU) tariffs like Economy 10 and Total Heating Total Control but there is little competition for these restricted tariffs and no Price Comparison Website information available for them, other than for Economy 7. Moreover, the technical changes required to the metering arrangements for these restricted tariffs make it harder for customers to switch to cheaper ones than for those customers who are already on 'normal' meters.

Links: Ofgem Insights Paper, December 2015 (Para. 4.39, page 49)

1.15 Incumbent supplier dominance of the rural electricity market

The two incumbent, ex-regional monopoly, electricity suppliers in Scotland have by far the largest market shares in the whole of the GB of customers who depend on them for electric heating purchased through Time of Use (ToU) tariffs like Economy 10, Comfort Plus and Total Heating Total Control. In the North of Scotland, SSE's market share of ToU customers is 85% and in the South of Scotland, Scottish Power's share is 78%. For single rate customers their shares are 61% and 37% respectively and, though the figures are not made publicly available, Task Force member experience indicates that in remote areas their market shares are much higher. UK-wide the comparative market share of the ex-regional monopoly suppliers is 45% for customers with ToU meters and 31% for others.

The predominant suppliers, both north and south, are charging most of their customers up to 50% more than the best tariff prices on offer. In addition, loyal customers in the north are being charged 2.1p for network charges when the actual cost is 0.9p (see 1.12)

Links: Ofgem Insights paper, December 2015 (Fig. 12, page 48)

1.16 Consumer engagement and switching

The great majority of rural consumers, including most of those with ToU meters, could cut their electricity bills by a third by switching from Standard Variable Tariffs, averaging around 15p per unit, to alternative fixed term tariffs of around 10p per unit, which are readily available in the marketplace. The reasons for this persistent lack of rural consumer engagement in saving many hundreds of pounds a year by switching are varied but Task Force member experience strongly suggests that, though lack of confidence about the pros and cons of changing long-standing supplier is key, where trusted intermediary advice and reassurance is on hand then most consumers are happy to switch.

Links: Ofgem Insights paper, December 2015 (Fig. 10 and 11, pages 45 to 49)

Competition and Marketing Authority investigation into the Energy Market (Paras. 120 to 123

Ofgem Insights paper on households with electric and other non-gas heating (Fig.11, page 47 - actual switching rates for single-rate and ToU customers by meter points and by distribution network and Fig.12, page 48 - market share of ex-regional monopoly suppliers etc.)

1.17 Supporting vulnerable households

Many vulnerable, households have not, in practice, been receiving the level of priority service and support they need from the predominant electricity and other non-gas energy suppliers. Moreover local experience strongly suggests that one-to-one fuel poverty advice and support is not yet delivering sufficient outreach coverage in rural areas.

Links: Competition and Marketing Authority investigation into the Energy Market (page 2 and 11)

Priority Services Register Review (Executive summary, page 5 & 6)

Ofgem Insights paper on households with electric and other non-gas heating (Table 11, page 66)

1.18 Regulation of the different energy markets

Whilst the Office Of Gas and Electricity Markets (Ofgem) and Competition and Markets Authority ( CMA) have identified many factors which contribute to gas and electricity market failure and the typically much higher than average heating energy bills in off-gas rural areas, regulatory requirements and interventions have so far been unable to deliver a level pricing playing field. This lack of regulation impacts disproportionately on rural, high energy consumption householders, particularly those who rely on electricity for their heating. Moreover, the prices for the main alternative fuels, domestic oil and LPG, on which rural households have to rely, remain unregulated.

Links: Ofgem Insights paper on households with electric and other non-gas heating

1.19 The multiplier effect+ VAT

The cumulative effect of all the foregoing rural dimensions is to increase domestic energy consumption and raise bills for most people living in rural and remote Scotland and, as a direct consequence, cause the much higher than national average levels of rural fuel poverty and extreme fuel poverty that are found there.

It should also be noted that for every thousand pounds spent on domestic energy bills, £50 more must be paid in VAT - a considerable addition to the bills of consumers living in higher than average consumption properties or in remote rural areas like the island groups.

Links: (See 1.11 Electricity consumption levels)

1.20 Health care costs

There is strong evidence to suggest that cold and/or damp housing exacerbates the health and well-being problems of vulnerable occupants and that fuel poverty makes self-imposed heat rationing more likely, thus exacerbating such cold and dampness related health problems. Resulting use of health care services and any ensuing hospital stays are likely to cost much more per patient in rural areas than in urban ones.

Links: The Annual Report of the Director of Public Health 2014 (References 33 to 44, page 64)

See Appendix 3, Health, Energy Efficiency & Affordable Warmth Evidence Review produced by Lochalsh and Skye Housing Associations Energy Advice Service 2016

1.21 'Rural-proofing' of fuel poverty indicators and programme and public investment outcomes

Key indicators, like rdSAP (reduced Standard Assessment Procedure) and SIMD (Scottish Index of Multiple Deprivation) which underpin the design of energy efficiency and fuel poverty policies and programmes, do not yet measure or meet rural and remote Scotland's requirements well enough. Key programmes, like the Energy Company Obligation ( ECO) and the Home Energy Efficiency Programmes for Scotland: Area Based Schemes ( HEEPS:ABS), record measures installed but not affordable warmth outcomes and are also under-delivering in rural settlements of 3000 or less - particularly remote ones. Nor is there matching clarity yet about the level or impact of public investment in rural areas.

Scottish Government's recent commitment to 'island-proofing' its investment programmes should be extended to 'rural-proof' all its fuel policy indicators and programme outcomes.

Links : A Plan For Scotland: The Scottish Government's Programme for Scotland 2016-17 (page 11, island proofing legislation and policies)

"Our rural numbers are not enough" (Full report)

See Appendix 3, statistics, HEEPS ABS measures urban / rural classification, page 10