The principle is that if you consume more, you pay at a higher price per unit. This is commendable policy. However, is it fair that a one-person household has the same daily allowances at each band as a household of 5, say?
As illustrated in Understanding the Arms bill (1), the daily allowances at each band are as follows:
For every kWh of the first 5.4794 kWh per day @ €0 .1047
For every kWh of the next 10.9589 kWh per day @ €0.1298
For every kWh of the next 10.9589 kWh per day @ €0.1607
For every kWh of the next 27.3973 kWh per day @ €0.3420
.........................................remaining kWh per day @ €0.6076
This means that every household needs to consume 27.3972 units per day before hitting Band 4 (€0.3420 c per day). EVERY household.
So a household of 1 has the same allowance of 27.3972 units per day - before hitting the high band of €0.3420 per unit - as does a household of 5.
Now I know that a household of 5 doesn’t have five times the electricity requirement as does a household of 1. After all, most households – large and small – have one fridge, one washing machine etc. But still it will be obvious to most that a larger household will consume more electricity – more heaters, more fans, more washing loads, more cooking…
Does the annual eco reduction superimposed on this stepped billing system make a difference for larger households? Does it make it fairer for larger households? Let’s look at this more closely.
How does the eco reduction work? In any one year, a reduction of 25% per person will apply on the first 1,000 units and a further 15% per person will apply on the remaining 750 units consumed.
So, converting this to a daily ceiling, there is a 25% reduction on the cost of the first 2.74 units per person per day (1000 units divided by 365 days) and a further 15% reduction on the next 2.05 units per person per day (750 units divided by 365 days). If this daily consumption of 4.79 units per person per day is exceeded, then there is no eco reduction.
How the eco reduction is calculated:
- There is a 25% reduction on the cost of the daily consumption of the first 2.74 units per person.
- There is a 15% reduction on the cost of the daily consumption of the next 2.05 units per person.
- If this daily consumption of 4.79 units per person is exceeded, then there is no eco reduction.
Let’s illustrate this for a household of 5. To be eligible for an eco-reduction, this household has to therefore consume less than 23.95 units per day (4.79 units per person multiplied by 5 persons). If this household exceeds this 23.95 units per day, then they get no eco reduction.
In my opinion, the annual eco reduction superimposed on a stepped cost per unit billing system is not working. It is meaningless to have these two initiatives acting in tandem. On the one hand, if you consume less than 27.3972 units per day (any size of household), you will not hit the very expensive €0.3420 band per unit. On the other, a household of 5 will also get a (small) eco reduction if it does not exceed 23.95 units per day (or 4.79 units per person per day).
The cost per unit jumps from €0.1607 at Band 3 to €0.342 at Band 4. Larger households will be more likely to cross from Band 3 to Band 4. This is a more significant factor than any compensation of an eco reduction in periods of lower consumption.
The table below shows the detail of the Arms billing of our household's annual electrical consumption. I looked at only the cost of our electricity consumption. I did not look at the service charge. We are a household of 5. As you can see from the table below, the daily cost per day is exactly the same pre eco reduction as it is post eco reduction. The eco reduction is clearly not compensating.