Public attitudes to the household energy market

For an initiative that seeks out the hot topics of public policy, British attitudes to household energy suppliers was an obvious choice for this year’s YouGov-Cambridge Spring Event, held at the British Academy on Thursday 3rd April under the title, “Energy, Politics and the Consumer”.

This was also the launch event for a special YouGov-Cambridge report on public opinion and the energy companies, which uniquely offered two key perspectives, namely the opinions of consumers and the industry itself.

Our survey of views from the industry was based on interviews with many of the central players in the sector by Stephan Shakespeare (Chief Executive, YouGov), while the general population reserach comprised several, extensive surveys of public opinion, including YouGov collaborations with David Howarth from the Cambridge POLIS Department (read his report here) and Dr David Reiner of the Cambridge Judge Business School (read his report here).

• See the event programme here, with speakers including a number of energy bosses as well as the Secretary and Shadow Secretary of State for Energy and Climate Change

• Read a Guardian write-up of the event here and a Times front page story on it here (£)

• Download the full report here and read Stephan Shakespeare’s report on views from the industry here

Looking across the range of opinion reserach conducted for this report, it is possible to identify several trends in public attitudes to the UK household energy market:

• The UK utilities sector now has a similar reputation score to banking while energy suppliers are widely seen as imposing inflation-busting bill rises to sustain ‘unfair’ profits.

• Much of the public also believe the household energy industry is a broken market and show little faith in any of the main actors to play their part effectively, from suppliers to policymakers to regulators.

• There is significant appetite for a more ‘visible hand’ from government to fix what’s broken, with tariff simplification, windfall taxes and price freezes topping the list of preferred policies.

• There is some acknowledgement of the industry’s need to incur and pass on costs, but little recognition of comparatively low per unit costs for UK energy.

• On the trilemma of climate, security and bills, consumers show notable concern about climate change but weak appetite overall for compromising on energy use or price to support green commitments.

• Finally, looking at the perceived impact of energy initiatives on bills, large majorities would expect a drop in bills from ‘shifting to more energy efficient appliances in the home’ (64%) and ‘improving the insulation in the home’ (65%). But the public is undecided about the impact of fracking, nuclear or wind power.

See below for more detailed analysis. Nb on methodology: fieldwork for Sections 1-7 was conducted in two surveys. Survey 1 was conducted online between 18–27 February, 2014, with a total sample of 2079 UK adults. Survey 2 was conducted online between 20–27 February, 2014, with a total sample of 2113 UK adults. The data have been weighted and the results are representative of all UK adults aged 18 or over. See results here.

1. The UK utilities sector has a similar reputation score to banking

7% say they ‘trust the UK utilities industry to focus on the best interests of its customers and wider society’, compared with three fifths (61%) who disagree.

This gives the industry a similar reputation score to banking (10% agree/ 60% disagree), and lower than several other sectors, including pharmaceuticals (30% agree/ 28% disagree), military equipment industry (15% agree/ 28% disagree) and insurance (14% agree/ 40% disagree).

Four in ten (42%) agree that ‘energy supply companies have worse ethics than big businesses in other sectors’, compared with 13% who disagree.

2. Suppliers seen as chasing ‘unfair’ profits and being the ultimate culprits for inflation-busting bill rises

When asked what they see as the main reasons for bills rising over inflation in recent years, 76% say ‘energy suppliers wanting to make more profit’.

This compares with:

• 47% choosing ‘government taxes including environmental taxes known as ‘green levies

• 46% choosing ‘higher costs of oil, coal and natural gas on the global market’

• 21% selecting ‘more UK energy has come from renewable or lower carbon sources which are more expensive than ‘traditional’ fossil fuels such as coal and conventional gas’

• 12% selecting ‘more money has been spent on investing in the UK’s energy infrastructure – for example building new power plants, maintaining transmission networks’

26% agree that energy suppliers make a fair level of profit, versus 52% who disagree and 6% saying ‘don’t know’, while 84% agree they ‘are quick to raise prices when their costs go up but they seem much slower in offering discounts when their costs fall’, versus 4% who disagree and 4% saying ‘don’t know’.

72% say it’s true that ‘energy supply companies make too much profit from high prices, and even if the profit they announce seems low, they probably make their money somewhere else - for instance in their wholesale business’. This compares with 9% saying this is false and 19% who ‘don’t know’.

Half the public (50%) further believe that energy costs are holding back the UK’s economic recovery, versus 14% who disagree and 12% saying ‘don’t know’.

3. Many believe the household energy industry is a broken market and show little faith in any of the main actors to play their part effectively

Beyond concerns directed at suppliers, there is an underlying view that the market is dysfunctional:

• 67% believe big energy suppliers act as a cartel, versus 7% disagree/9% ‘don’t know’.

• 62% say it’s true that ‘energy supply companies are working together to keep prices higher than they need to be and stop new companies coming in with lower prices’, versus 14% saying this is false/ 24% saying ‘don’t know’.

• Only 17% say they are ‘confident the big energy suppliers comply with Government regulations’, versus 38% disagree/ 33% neither agree nor disagree/ 12% ‘don’t know’.

The public are more divided on the question of switching:

• 40% believe ‘it is too hard for people to switch suppliers, so they become stuck on expensive tariffs and therefore need direct help to cut their bills’, versus 41% saying this is false/ 19% saying ‘don’t’ know’.

But energy suppliers hardly shoulder the blame for market failure alone. No actor is seen as playing their part effectively:

• 57% have little or no trust in Ofgem to protect the interests of consumers.

• 58% have little or no trust in journalists to properly report on the energy market.

• 78% have little or no trust in politicians to bring in effective policies.

• 77% have little or no trust in energy suppliers to provide households with a reliable and fairly priced energy supply.

If politicians and practitioners have promised to take action to help the consumer, then many seem unconvinced:

• Only a quarter of the public (25%) believe recent energy price discussions among politicians have put pressure on energy companies to keep their prices lower, compared with 37% who disagree, 29% who ‘neither agree/disagree’ and 9% saying ‘don’t know’.

• 70% expect energy bills will continue to rise above inflation over coming years, compared with 12% expecting them to rise in line with inflation, 3% expecting a decrease, and 4% thinking they will rise below inflation or remain the same as now respectively.

A majority also appear to think the energy debate has become overly politicised:

• 68% agree ‘the issue of energy prices has become a political football which is unlikly to actually help customers’, versus 8% disagree/ 18% neither agree nor disagree/ 7% ‘don’t know’.

4. Significant appetite for the ‘visible hand’ of government to help fix what’s broken

Accordingly, respondents show significant appetite for hands-on involvement by government to fix what’s broken:

• 66% agree the ‘electricity and gas supply market has major problems which government needs to address’, versus 5% disagree/ 19% neither agree nor disagree/ 9% ‘don’t know’.

• Only 18% say it’s true that ‘markets like energy supply work best without government interference’, versus 48% saying this is false/ 34% saying ‘Don’t know’.

• Almost two thirds (59%) support the idea of the government forcing energy supply companies to cut the unit cost of electricity and gas in the UK, versus 8% who oppose/10% saying ‘don’t know’.

Energy costs also rank high on the list of areas where people want to see government action to reduce prices.

Table 1: Some people believe that the Government should attempt to reduce costs for households. Would you like to see the Government attempt to reduce costs in any of the following areas? If so please select up to TWO areas from the list below.

40% say it’s true that ‘the cost of developing and maintaining the UK’s energy infrastructure (e.g. building new power plants) is rising fast, and this gets passed to energy suppliers who in turn must pass it on to consumers. Without this money, the security of our energy supply is threatened’.There is some recognition of the industry’s need to incur and pass on costs, but little recognition of comparatively low per unit costs for UK household energy.A significant plurality of the public appear receptive to the argument that energy infrastructure and security incurs costs that knock on to consumers:

• By comparison, 30% think this is false and a further 30% choose ‘don’t know’.

But there seems less acceptance about the comparatively low per unit cost of UK household energy

• Only 8% agree that ‘the price households pay for each unit of energy in the UK is amongst the lowest in Europe’, versus 42% disagree/ 17% neither agree nor disagree/ 33% ‘don’t know’.

• Half (50%) of the public believe UK household energy bills are amongst the highest in Europe, versus 6% disagree/ 15% neither agree nor disagree/ 29% ‘don’t know’.

5. A majority claim to have changed behaviour to cope with energy bills

Over half of the public (51%) claim to have turned the heating down or off in the past year in order to be able to pay gas or electricity bills.

16% say they have spent less on food for the same reason.

Close to a third of respondents (30%) claimed to spend 10% or more of their household income on energy bills, while 60% now believe that cutting the amount of energy they consume is the only way their bills are likely to come down in the future (just 15% disagree).

6. Notable concern for climate change but weak appetite overall for compromising on energy use or price to support green policies

Climate change is an area of notable public concern with half (52%) agreeing it is one of the biggest issues facing the world right now, versus 21% disagree/ 23% neither agree nor disagree/ 4% ‘don’t know’.

But there is weak appetite for taking on emissions commitments if it drives up energy prices: only 30% agree the UK should stick to its commitments on reducing carbon emissions even if it means higher costs for households, versus 43% disagree and 27% saying ‘don’t know’.

36% agree we should ‘be prepared to make sacrifices now by using less energy, or paying more for it, in order to protect the environment for future generations’, versus 32% who disagree, 28% who neither agree/disagree and 4% saying ‘don’t know’.

7. Tariff simplification, windfall taxes and price freezes top the list of preferred policies

The appetite for increased involvement by the state is evident in the popularity of certain policies. The most popular policies in this research included: simplification of bills and reduction in number of tariffs; a windfall tax on the energy companies and a price freeze on energy tariffs for 20 months from May 2015. (See Table 2 below)

Table 2: Please rate each of the following UK energy policies or possible policy changes in terms of how favourable you feel towards each, from very unfavourable to very favourable:

8. Perceived impact of energy initiatives on bills

In separate research with Dr David Reiner (Assistant Director of the Energy Policy Research Group at the Judge Business School, University of Cambridge), we also looked at the perceived impact of various energy initiatives on respondents’ future energy bills

(Nb on methodology: fieldwork for Section 8 was conducted online between 29-30 January, 2014, with a total sample of 1942 British adults. Data from the total sample was weighted to be nationally representative of all British adults aged 18 or over. See results below)

Significant majorities expected a drop in bills from ‘shifting to more energy efficient appliances in the home’ (64%) and ‘improving the insulation in the home’ (65%). Respondents were less certain about the impact of other measures:

31% said fracking would cause a drop in bills, compared with 27% saying it would have ‘no impact’, 13% saying it would cause a rise, and 29% saying ‘don’t know’.

27% said the ‘recent agreement to build a new nuclear power plant’ would cause a drop in bills, compared with 28% saying it would have ‘no impact’, 21% saying it would cause a rise and 25% saying ‘don’t know’.

27% thought ‘building more offshore wind farms’ would cause a drop in bills, compared with 29% saying it would have ‘no impact’, 23% saying it would cause a rise and 21% saying ‘don’t know’.

24% said ‘building more onshore wind farms’ would cause a drop in bills, compared with 31% saying it would have ‘no impact’, 23% saying it would cause a rise and 22% saying ‘don’t know’.

Table 3: What impact do you believe the following will have on your future energy bills?