For many Australians, getting to the end of the month with any money in the bank is an impossible dream. A Google search on managing money returns hundreds of tips, such as paying off credit cards before interest applies, bringing lunch from home rather than getting takeaway and cutting back on buying a coffee each day. But what if your budget is so razor thin that the decision is not how many coffees to buy a day but whether you can afford to heat up your dinner?
Take Sophie* from a typical suburb in Melbourne we have visited. Sophie is on a pension and takes care of her family the best she can. Her three kids do well at school but Sophie can’t afford the fees for her kids to play for their local sports team, attend dance classes or participate in extracurricular school activities like school camp. After rent, food and transport her family budget is stretched beyond breaking point. Forget holidays or even medical expenses. Sophie’s budget is tight but what makes it impossible is the $10,000 electricity bill hovering over her head. No matter how much she scrimps and saves, she can never pay it off.
Sophie’s story is not unique. Another family we have spent time with was eating only tinned food, kept the blinds drawn, turned off all the lights, never used the heating, had no cooling and unplugged the fridge to save energy.
Energy poverty is a big problem in Australia, with far too many households unable to pay their electricity bills. Low income households typically live in lower quality housing with poor insulation, heating and cooling. They can’t afford expensive energy efficient appliances, and now spend on average 8 per cent of their weekly income on energy, compared to those with the highest income who spend only 2 per cent of their weekly income.
It’s clear that energy poverty is having a negative effect on not only household finances, but also on the health and wellbeing of individuals within households.
With stagnant wage growth and electricity prices increasing by 117 per cent over the past 10 years, higher energy bills means sacrificing other expenses. Nine per cent of adults and 6.5 per cent of children regularly go without a substantial daily meal because they can’t afford it.
Poor nutrition and lack of funds for suitable school materials and uniforms mean that energy poverty is adversely affecting the engagement of children at school.
Low income households are also exposed to having their energy disconnected for non-payment. Over the past eight years, disconnections have increased by 47 per cent. Nation-wide this equates to 160,000 households cut off from gas and electricity. At the same time, energy hardship support has decreased by 32 per cent.
The Australian Consumer and Competition Commission and the AER – the national energy regulator – point to problems with energy literacy and hardship assistance. The AER proposes to develop a binding Customer Hardship Policy Guideline, which would set out how hardship programs should be applied, while providing households with a clear understanding of their rights and entitlements.
But even the best hardship program won’t be enough to bridge the gap between low household incomes and high, increasing energy bills.
It’s clear some of our neighbours are living with extreme poverty as a result of rising energy bills and it is also clear we are not looking after our most vulnerable. Tackling energy poverty requires more affordable energy, better quality housing and efficient appliances, improved energy literacy, and energy retailers that understand and work with low income families to prevent disconnections.
Now, before any more families suffer through another cold night or scorching hot summer without power, the ACCC and AER recommendations must be enacted. This is required to build in the protections needed for our neighbours in financial hardship, and provide the assistance required to improve energy literacy.
*Name changed for privacy
The Moreland Energy Foundation Ltd (MEFL) is dedicated to working towards an equitable zero carbon society and a just transition to a decentralised, renewable energy system. Its thought leadership paper Energy Justice – we need to look after our neighbours highlights research on the urgency for Australia to support the vulnerable and socio-economically disadvantaged members of the community. MEFL’s Spark! 2018 conference is taking place in Melbourne on 20-21 September