IDEAS home Printed from https://ideas.repec.org/p/cam/camdae/2129.html
   My bibliography  Save this paper

Vulnerable households and fuel poverty: policy targeting efficiency in Australia’s National Electricity Market

Author

Listed:
  • Simshauser, P.

Abstract

When Australia established its National Electricity Market (NEM) during the 1990s, reforms were focused on maximising economic efficiency. Little thought was given to distributional outcomes. However, by the 2010s sluggish growth in household incomes, sharp rises in electricity prices and material increases in quantities consumed through surging uptake rates of air-conditioning units led to the possibility of (hot climate) fuel poverty. In the NEM’s Queensland region, longstanding customer hardship policy pre-dated the NEM. With the benefit of hindsight, the policy was poorly configured as it focused exclusively on the aged population and was delivered by way of fixed payment. Low income households in the family formation cohort were excluded from the policy despite obvious need. In this article, Queensland’s longstanding customer hardship policy is refined using pre-existing (meanstested) welfare mechanisms in order to target low income households including families, and the payment structure is altered from fixed ($ pa) to variable (% of the bill) while holding the budget constraint constant. Changes to policy targeting produce material improvements in horizontal and vertical efficiency while changes to payment structure further enhance vertical performance, with the incidence and depth of residual fuel poverty reduced.

Suggested Citation

  • Simshauser, P., 2021. "Vulnerable households and fuel poverty: policy targeting efficiency in Australia’s National Electricity Market," Cambridge Working Papers in Economics 2129, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2129
    as

    Download full text from publisher

    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2129.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael Stone, 2006. "What is housing affordability? The case for the residual income approach," Housing Policy Debate, Taylor & Francis Journals, vol. 17(1), pages 151-184.
    2. Robert Tanton & Ben Phillips, 2013. "A Measure of the Depth of Housing Stress and its Application in Australia," Economic Papers, The Economic Society of Australia, vol. 32(1), pages 99-109, March.
    3. Carlotta Balestra & Richard Tonkin, 2018. "Inequalities in household wealth across OECD countries: Evidence from the OECD Wealth Distribution Database," OECD Statistics Working Papers 2018/01, OECD Publishing.
    4. Paul Simshauser, 2014. "From First Place to Last: The National Electricity Market's Policy-Induced ‘Energy Market Death Spiral’," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 47(4), pages 540-562, December.
    5. Esplin, Ryan & Davis, Ben & Rai, Alan & Nelson, Tim, 2020. "The impacts of price regulation on price dispersion in Australia's retail electricity markets," Energy Policy, Elsevier, vol. 147(C).
    6. Tim Nelson & Paul Simshauser & Simon Kelley, 2011. "Australian Residential Solar Feed-in Tariffs: Industry Stimulus or Regressive Form of Taxation?," Economic Analysis and Policy, Elsevier, vol. 41(2), pages 113-129, September.
    7. Guertler, Pedro, 2012. "Can the Green Deal be fair too? Exploring new possibilities for alleviating fuel poverty," Energy Policy, Elsevier, vol. 49(C), pages 91-97.
    8. Awaworyi Churchill, Sefa & Smyth, Russell & Farrell, Lisa, 2020. "Fuel poverty and subjective wellbeing," Energy Economics, Elsevier, vol. 86(C).
    9. Waddams Price, Catherine & Brazier, Karl & Wang, Wenjia, 2012. "Objective and subjective measures of fuel poverty," Energy Policy, Elsevier, vol. 49(C), pages 33-39.
    10. M. Pollitt, 2004. "Electricity reform in Chile. Lessons for developing countries," Competition and Regulation in Network Industries, Intersentia, vol. 5(3), pages 221-263, September.
    11. Littlechild, Stephen, 2018. "Competition, regulation and price controls in the GB retail energy market," Utilities Policy, Elsevier, vol. 52(C), pages 59-69.
    12. Catherine Waddams Price & Minyan Zhu, 2016. "Non-discrimination Clauses: Their Effect on British Retail Energy Prices," The Energy Journal, , vol. 37(2), pages 111-132, April.
    13. Emmanuel Skoufias & David P. Coady, 2007. "Are the Welfare Losses from Imperfect Targeting Important?," Economica, London School of Economics and Political Science, vol. 74(296), pages 756-776, November.
    14. Mazzone, Antonella, 2020. "Thermal comfort and cooling strategies in the Brazilian Amazon. An assessment of the concept of fuel poverty in tropical climates," Energy Policy, Elsevier, vol. 139(C).
    15. Paul Simshauser & David Downer, 2016. "On the Inequity of Flat-rate Electricity Tariffs," The Energy Journal, , vol. 37(3), pages 199-230, July.
    16. Moore, Richard, 2012. "Definitions of fuel poverty: Implications for policy," Energy Policy, Elsevier, vol. 49(C), pages 19-26.
    17. Simshauser, Paul & Whish-Wilson, Patrick, 2017. "Price discrimination in Australia's retail electricity markets: An analysis of Victoria & Southeast Queensland," Energy Economics, Elsevier, vol. 62(C), pages 92-103.
    18. David P. Byrne, Andrea La Nauze, and Leslie A. Martin, 2021. "An Experimental Study of Monthly Electricity Demand (In)elasticity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 205-222.
    19. Bennett, M & Cooke, D & Catherine Waddams-Price, 2002. "Left out in the cold? New energy tariffs, low-income households and the fuel poor," Fiscal Studies, Institute for Fiscal Studies, vol. 23(2), pages 167-194, June.
    20. repec:bla:econom:v:63:y:1996:i:250:p:s163-74 is not listed on IDEAS
    21. Dorothee Charlier and Berangere Legendre, 2019. "A Multidimensional Approach to Measuring Fuel Poverty," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    22. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-231, March.
    23. repec:bla:econom:v:65:y:1998:i:258:p:285-93 is not listed on IDEAS
    24. Tim Nelson & Paul Simshauser & James Nelson, 2012. "Queensland solar feed-in tariffs and the merit-order effect: economic benefit, or regressive taxation and wealth transfers?," Economic Analysis and Policy, Elsevier, vol. 42(3), pages 277-301, December.
    25. Beckerman, W, 1979. "The Impact of Income Maintenance Payments on Poverty in Britain, 1975," Economic Journal, Royal Economic Society, vol. 89(354), pages 261-279, June.
    26. Dorothée Charlier & Sondès Kahouli, 2019. "From Residential Energy Demand to Fuel Poverty: Income-induced Non-linearities in the Reactions of Households to Energy Price Fluctuations," The Energy Journal, , vol. 40(2), pages 101-138, March.
    27. Steven Rowley & Rachel Ong & Marietta Haffner, 2015. "Bridging the Gap between Housing Stress and Financial Stress: The Case of Australia," Housing Studies, Taylor & Francis Journals, vol. 30(3), pages 473-490, June.
    28. Bradshaw, Jonathan & Hutton, Sandra, 1983. "Social policy options and fuel poverty," Journal of Economic Psychology, Elsevier, vol. 3(3-4), pages 249-266, September.
    29. Fankhauser, Samuel & Tepic, Sladjana, 2007. "Can poor consumers pay for energy and water? An affordability analysis for transition countries," Energy Policy, Elsevier, vol. 35(2), pages 1038-1049, February.
    30. Toru Yamamori, 2019. "The Smithian ontology of ‘relative poverty’: revisiting the debate between Amartya Sen and Peter Townsend," Journal of Economic Methodology, Taylor & Francis Journals, vol. 26(1), pages 70-80, January.
    31. Jeffrey C. Peters & Thomas W. Hertel, 2017. "Achieving the Clean Power Plan 2030 CO2 Target with the New Normal in Natural Gas Prices," The Energy Journal, , vol. 38(5), pages 39-66, September.
    32. Dorothee Charlier and Sondes Kahouli, 2019. "From Residential Energy Demand to Fuel Poverty: Income-induced Non-linearities in the Reactions of Households to Energy Price Fluctuations," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    33. Besley, Timothy & Kanbur, Ravi, 1990. "The principles of targeting," Policy Research Working Paper Series 385, The World Bank.
    34. John Hills, 2012. "Getting the measure of fuel poverty: Executive summary," CASE Briefs 31, Centre for Analysis of Social Exclusion, LSE.
    35. Heinz Welsch & Philipp Biermann, 2017. "Energy Affordability and Subjective Well-Being: Evidence for European Countries," The Energy Journal, , vol. 38(3), pages 159-176, May.
    36. Simshauser, Paul, 2016. "Distribution network prices and solar PV: Resolving rate instability and wealth transfers through demand tariffs," Energy Economics, Elsevier, vol. 54(C), pages 108-122.
    37. Rosenow, Jan & Platt, Reg & Flanagan, Brooke, 2013. "Fuel poverty and energy efficiency obligations – A critical assessment of the supplier obligation in the UK," Energy Policy, Elsevier, vol. 62(C), pages 1194-1203.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simshauser, Paul, 2021. "Vulnerable households and fuel poverty: Measuring the efficiency of policy targeting in Queensland," Energy Economics, Elsevier, vol. 101(C).
    2. Simshauser, Paul, 2023. "The 2022 energy crisis: Fuel poverty and the impact of policy interventions in Australia's National Electricity Market," Energy Economics, Elsevier, vol. 121(C).
    3. Paul Simshauser, 2022. "The 2022 energy crisis: horizontal and vertical impacts of policy interventions in Australia's national electricity market," Working Papers EPRG2216, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Simshauser, P., 2023. "Fuel poverty in Queensland: horizontal and vertical impacts of the 2022 energy crisis," Cambridge Working Papers in Economics 2257, Faculty of Economics, University of Cambridge.
    5. Simshauser, Paul & Miller, Wendy, 2023. "On the impact of targeted and universal electricity concessions policy on fuel poverty in the NEM's Queensland region," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1848-1857.
    6. Paul Simshauser, 2022. "Fuel Poverty and the 2022 Energy Crisis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(4), pages 503-514, December.
    7. Kahouli, Sondès & Okushima, Shinichiro, 2021. "Regional energy poverty reevaluated: A direct measurement approach applied to France and Japan," Energy Economics, Elsevier, vol. 102(C).
    8. Simshauser, Paul, 2018. "Price discrimination and the modes of failure in deregulated retail electricity markets," Energy Economics, Elsevier, vol. 75(C), pages 54-70.
    9. Wang, Yao & Lin, Boqiang, 2022. "Can energy poverty be alleviated by targeting the low income? Constructing a multidimensional energy poverty index in China," Applied Energy, Elsevier, vol. 321(C).
    10. Deller, David & Turner, Glen & Waddams Price, Catherine, 2021. "Energy poverty indicators: Inconsistencies, implications and where next?," Energy Economics, Elsevier, vol. 103(C).
    11. Burlinson, Andrew & Giulietti, Monica & Law, Cherry & Liu, Hui-Hsuan, 2021. "Fuel poverty and financial distress," Energy Economics, Elsevier, vol. 102(C).
    12. Ye, Yuxiang & Koch, Steven F., 2021. "Measuring energy poverty in South Africa based on household required energy consumption," Energy Economics, Elsevier, vol. 103(C).
    13. Paul Simshauser & Tim Nelson & Joel Gilmore, 2022. "The sunshine state: implications from mass rooftop solar PV take-up rates in Queensland," Working Papers EPRG2219, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    14. Alan Rai & Tim Nelson, 2020. "Australia's National Electricity Market after Twenty Years," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(2), pages 165-182, June.
    15. Rodriguez-Alvarez, Ana & Orea, Luis & Jamasb, Tooraj, 2019. "Fuel poverty and Well-Being:A consumer theory and stochastic frontier approach," Energy Policy, Elsevier, vol. 131(C), pages 22-32.
    16. Chang, Lei & Gan, Xiaojun & Mohsin, Muhammad, 2022. "Studying corporate liquidity and regulatory responses for economic recovery in COVID-19 crises," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 211-225.
    17. Esplin, Ryan & Nelson, Tim, 2022. "Redirecting solar feed in tariffs to residential battery storage: Would it be worth it?," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 373-389.
    18. George E. Halkos & Panagiotis-Stavros C. Aslanidis, 2023. "Addressing Multidimensional Energy Poverty Implications on Achieving Sustainable Development," Energies, MDPI, vol. 16(9), pages 1-30, April.
    19. Okushima, Shinichiro, 2016. "Measuring energy poverty in Japan, 2004–2013," Energy Policy, Elsevier, vol. 98(C), pages 557-564.
    20. Paudel, Jayash, 2021. "Why Are People Energy Poor? Evidence From Ethnic Fractionalization," Energy Economics, Elsevier, vol. 102(C).

    More about this item

    Keywords

    Energy Affordability; Fuel Poverty; Policy Targeting; Targeting Efficiency; Customer Hardship Policy;
    All these keywords.

    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cam:camdae:2129. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jake Dyer (email available below). General contact details of provider: https://www.econ.cam.ac.uk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.