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Energy poverty, unprecedented growth

28 November 2023

Paying energy bills has become a high burden, in the context of rising energy prices and the erosion of purchasing power caused by inflation, and energy poverty affects not only the poorest population, but is a phenomenon that has grown alarmingly among the middle-income population as well, according to a study carried out by the Romanian Energy Poverty Observatory (ORSE).

The study, carried out on the basis of the data contained in the Family Budget Survey carried out by the National Institute of Statistics, indicates that the energy poverty rate measured by the LIHC (“Low Income, High Cost”) indicator shows that 21% of households were in the situation of who gave up other needs for thermal comfort in their homes in 2022, double the 2021 level of 10.5%.

The LIHC indicator is one of the main indicators used to measure energy poverty among the population. This indicator does not necessarily reflect the inability of these households to heat themselves, but shows that energy bills have a very high impact on their budget. Practically, after paying their energy bills, the value of which is above the national median level, these households fall below the monetary poverty threshold, states the quoted source.

“Obviously, through this indicator we see that energy bills have a very big impact on the household budget. It’s what the British call ‘heat or food’. That is, these citizens have to prioritize energy, but in doing so they have to to massively cut expenses for other needs in the household. For us, this indicator is telling. The data shows that the problem of energy poverty is growing and can no longer be ignored. We need to seriously put actors who know the problem and to take coherent, integrated and timely measures, because time is running out. It is important to have state institutions at the discussion table, because they produce and implement policies, energy companies (suppliers and distributors), because they are in contact with consumers every day and perceive the market differently. We also need to sit down with consumers and understand how the phenomenon affects them in each context, at the local level. Therefore, we must analyze the causes very precisely and produce specific solutions,” said Anca Sinea, vice-president of the Association Center for the Study of Democracy (CSD), coordinator of ORSE.

Analyzing the situation among households classified by income deciles (income thresholds per equivalent adult), in which decile 1 includes the poorest population, and decile 10 – the population with the highest incomes, ORSE data show that 20.8% of households located in decile 1 were affected in 2022 by poverty associated with paying energy bills, an increasing percentage compared to the previous year (17.9%).

Among households in decile 2, the rate of energy poverty associated with paying bills was around 34% of households, a percentage similar to that in 2021.

Also, over 45% of decile 3 households fell below the poverty line after paying their energy bills in 2022, compared to around 30% in the previous year. The hardest hit were households in the fourth income decile: 51% of them fell into poverty after paying their energy bills last year, a rate almost five times higher than in 2021, when it was 10, 5%.

The energy poverty rate measured by the LIHC indicator among households in the 5th income decile increased more than fivefold, from 6% in 2021 to 34% of these households in 2022. At the same time, the energy poverty rate increased by about four times times among households in decile 6 (from 3.5% to 13.7%) and tripled among households in income decile 7, from 1.9% in 2021 to 5.9% in 2022. Poverty energy associated with paying energy bills among households in the 8th income decile increased about 6 times in the mentioned interval, from 0.5% to 3.1%.

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