Energy poverty
Recital 24 of the Directive (EU) 2018/2002 of the European Parliament and of the Council of 11 December 2018 amending Directive 2012/27/EU on energy efficiency mentions around 50 million households in the European Union to be affected by energy poverty.
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Nevertheless, the straightforward definition of energy poverty does not exist (ACER/CEER Annual Report of 22 October 2018 on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2017, Consumer Empowerment Volume).
The Third Energy Package only alludes to energy poverty, and the Electricity Directive (Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC) and the Gas Directive (Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC) do not define specifc measures to protect vulnerable consumers.
Commission Recommendation of 14.10.2020 on energy poverty ({SWD(2020) 960 final}, C(2020) 9600 final) defines energy poverty as a situation, in which households are unable to access essential energy services and mentions nearly 34 million Europeans unable to afford to keep their homes adequately war in 2018 (Eurostat).
It is left to the EU Member States to decide to what extent specific measures are introduced in the energy laws or whether this belongs to the remit of the general social security system.
The subsequent Clean Energy Package (Clean Energy for All Europeans or CEP) - contains clear actions to be undertaken and the obligations laid upon the EU Member States to monitor energy poverty as well as to take measures against it.
The recast Electricity Directive (Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity) specifes that the concept of vulnerable customers may include income levels, the share of energy expenditure in disposable income, the energy efficiency of homes, critical dependence on electrical equipment for health reasons, age or other criteria (Articles 28, 29).
The recast Electricity Directive mandates, in recital 58, that ‘Member States should take the necessary measures to protect vulnerable and energy poor customers in the context of the internal market in electricity.’
When preparing the national climate and energy plans under Article 3(3)(d) of the Regulation of the European Parliament and of the Council on the Governance of the Energy Union the EU Member States are required to assess the number of households in energy poverty taking into account the necessary domestic energy services needed to guarantee basic standards of living in the relevant national context, existing social policy and other relevant policies, as well as indicative European Commission guidance on relevant indicators for energy poverty.
In the event that the EU Member State finds that it has a significant number of households in energy poverty as supported by its assessment based on verifiable data, it must include in its plan a national indicative objective to reduce energy poverty.
Where available, those Member States concerned are required to outline in their plans policies and measures addressing energy poverty, including social policy measures and other relevant national programmes.
According to the said Regulation on the Governance of the Energy Union, the EU Member States’ reporting on energy poverty included in integrated national energy and climate progress report must cover:
- information on progress towards the national indicative objective to reduce the number of households in energy poverty;
- quantitative information on the number of households in energy poverty, and, where available,
- information on policies and measures addressing energy poverty.
The European Commission is required to share the above data with the European Energy Poverty Observatory.
The compliance with the above requirements is a precondition for the application by the Member State of public interventions in price-setting for the supply of electricity.
In this context it is useful to refer to Article 5(2) of the recast Electricity Directive, which stipulates that ‘Member States shall ensure the protection of energy poor or vulnerable household customers pursuant to Articles 28 and 29 by social policy or by other means than public interventions in the price setting for the supply of electricity.’
However, the same Directive establishes in a subsequent Article 5(4) and 5(5) the preconditions for the EU Member States’ derogation that allows to apply public intervention in electricity price to protect energy poor or vulnerable household customers.
According to this derogation clause, the EU Member States’ exceptional public interventions in price-setting for the supply of electricity, to protect energy poor or vulnerable household customers must:
- pursue a general economic interest and not go beyond what is necessary to achieve that general economic interest;
- be clearly defined, transparent, non-discriminatory and verifiable;
- guarantee equal access for Union electricity undertakings to customers;
- be limited in time and proportionate as regards their beneficiaries;
- not result in additional costs for market participants in a discriminatory way.
The said ACER/CEER Annual Report of 22 October 2018 noted that in 2017 only 5 CEER Members had definitions of energy poverty, i.e. Cyprus, France, Great Britain, Romania and Spain.
According to these definitions, the percentages of energy poor people in the above 5 countries were: 4.6% in Cyprus, 8% in Spain, 9.1% (electricity) and 14.2% (gas) in France, 10.3% in Romania and 11.1% in Great Britain.
Cyprus and Spain however, only had a definition of energy poverty in electricity and not in gas.
When it comes to reasons for energy poverty the three main drivers can be differentiated:
- firstly, the costs of energy are crucial and they are the result of market forces;
- the second important part of the energy bill are network tariffs, which are regulated (approved by national regulatory authorities),
- thirdly, taxes and levies imposed on energy are impacted by political decisions regarding the funding of the energy transition.